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Why Is Advance Auto Parts (AAP) Up 5.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Advance Auto Parts (AAP - Free Report) . Shares have added about 5.7% in that time frame, outperforming the S&P 500.

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

Advance Auto Parts Beats on Q2 Earnings & Revenues

Advance Auto Parts reported adjusted earnings of $1.97 per share in second-quarter 2018 (ended Jul 14, 2018), up from $1.58 in the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $1.85. Adjusted operating income increased to $167.5 million from $146.7 million in second-quarter 2017.

Advance Auto Parts reported net revenues of $2.33 billion, beating the Zacks Consensus Estimate of $2.26 billion. Revenues were 2.8% higher than the year-ago quarter. During the quarter under review, comparable store sales were 2.8% higher year over year.

Gross profit was $1.01 billion in the reported quarter, higher than the prior-year quarter figure of $993.1 million. Gross Profit margin decreased 40 basis points year over year to 44.3%.

Adjusted selling, general and administrative (SG&A) expenses totaled $811.6 million or 34.9% of sales compared with $1797.6 million or 35.2% of sales in the year-ago period.

Financial Position

Advance Auto Parts had cash and cash equivalents of $902.2 million as of Jul 14, 2018, up from $257.2 million as of Jul 15, 2017. The total long-term debt was $1.05 billion as of Jul 14, 2018, higher than $1.04 billion as of Dec 30, 2017.

In second-quarter 2018, operating cash flow was $444 million compared with $267.3 million in the same period of 2017.

Share Repurchase

On Aug 8, 2018, the board of directors authorized a $600-million share repurchase program, replacing the existing $500-million share repurchase program.

Store Update

As of Jul 14, 2018, Advance Auto Parts operated 5,026 stores and 133 Worldpac branches and served approximately 1,219 independently-owned Carquest stores.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Advance Auto Parts has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Advance Auto Parts has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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