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Advance Auto Parts' (AAP) Q3 Earnings: Is a Beat in Store?

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Advance Auto Parts, Inc. (AAP - Free Report) is set to report third-quarter 2018 results before the opening bell on Nov 13.

In the last reported quarter, the company delivered a positive surprise of 6.5%. Per the earnings record, it beat estimates in all the trailing four quarters, average beat being 12.6%.

In the past three months, shares of Advance Auto Parts have outperformed the industry it belongs to. The stock moved up 15.4% compared with 5% growth recorded by the industry during the period.

Advance Auto Parts, Inc. Price and EPS Surprise

 

Let’s see, how things have shaped up for the upcoming announcement.

Is a Positive Surprise Likely?

Our proven model shows that Advance Auto Parts is likely to beat on earnings this quarter. That is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — for increasing the odds of an earnings beat.

Earnings ESP: The company has an Earnings ESP of +1.94% as the Most Accurate Estimate is pegged at $1.79, higher than the Zacks Consensus Estimate of $1.76. A positive ESP indicates that an earnings surprise is likely. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Advance Auto Parts currently carries a Zacks Rank #2 (Buy). This, when combined with a positive ESP, makes us reasonably confident of earnings beat.

Conversely, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What’s Driving Better-Than-Expected Earnings?

With an opportunity to gain additional market share of up to 7%, Advance Auto Parts is focusing on expansion through partnerships, increasing online presence and opening stores. In October, it announced that it collaborated with Walmart. Per the partnership, Advance Auto Parts will create an automotive specialty store on Walmart.com. The company is reaping benefits from enhanced online traffic, which is enabling it to offer its extensive portfolio of aftermarket auto parts, accessories and maintenance items to a larger customer base.

Moreover, Advance Auto Parts is undertaking various initiatives to streamline its end-to-end supply chain. It is optimizing its distribution network by closing two distribution centers by the end of the year. Streamlining supply chains will enable the company to meet the evolving need of customers while improving efficiency and reducing costs.

However, improving the supply chain, along with IT projects, is increasing capital investment for Advance Auto Parts, thus, hampering margins.

Other Stocks to Consider

Here are a few other stocks worth considering from the same space, with the right combination of elements to outpace earnings estimates this time around:

Meritor, Inc. (MTOR - Free Report) has an Earnings ESP of +13.30% and a Zacks Rank #3. The company will report fourth-quarter fiscal 2018 financial figures on Nov 14.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Navistar International Corporation (NAV - Free Report) has an Earnings ESP of +0.20% and a Zacks Rank of 3. The company’s fourth-quarter fiscal 2018 financial results are scheduled to be released on Dec 18.

BorgWarner Inc. (BWA - Free Report) has an Earnings ESP of +0.03% and a Zacks Rank of 3. The company’s fourth-quarter 2018 financial results are anticipated to be released on Feb 14.

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