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Why Is Advance Auto Parts (AAP) Up 19.9% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Advance Auto Parts, Inc. (AAP - Free Report) . Shares have added about 19.9% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is AAP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Advance Auto Parts Q1 Earnings Beat Estimates, Up Y/Y

Advance Auto Parts reported adjusted earnings of $2.10 per share in first-quarter 2018 (ended Apr 21, 2018), up from $1.60 in the prior-year quarter. Also, the figure surpassed the Zacks Consensus Estimate of $1.98. Adjusted operating income increased to $224.1 million from $204.9 million in first-quarter 2017.

Advance Auto Parts reported net revenues of $2.87 billion, missing the Zacks Consensus Estimate of $2.91 billion. Revenues were 0.6% lower than the year-ago quarter. During the quarter under review, comparable store sales were down 0.8% year over year.

Gross profit was $1.27 billion in the reported quarter, almost in line with the prior-year period. Gross Profit margin increased 32 basis points year over year to 44.3%.

Adjusted selling, general and administrative (SG&A) expenses totaled $1.05 billion or 36.5% of sales compared with $1.07 billion or 36.9% of sales in the year-ago period.

Financial Position

Advance Auto Parts had cash and cash equivalents of $639 million as of Apr 21, 2018, up from $547 million as of Dec 30, 2017. The total long-term debt was $1.04 billion as of Apr 21, 2018, almost unchanged from the figure released on Dec 30, 2017.

In first-quarter 2018, operating cash flow was $154 million compared with $35.1 million in the same period of 2017.

Store Update

As of Apr 21, 2018, Advance Auto Parts operated 5,044 stores and 131 Worldpac branches while serving approximately 1,225 independently-owned Carquest stores.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions higher for the current quarter compared to five lower.

Advance Auto Parts, Inc. Price and Consensus

VGM Scores

At this time, AAP has a great Growth Score of A, though it is lagging a lot on the momentum front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for value and to a lesser degree momentum.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, AAP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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