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Advance Auto Parts (AAP) Down 6% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Advance Auto Parts (AAP - Free Report) . Shares have lost about 6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Advance Auto Parts due for a breakout? 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 Q3 Earnings & Revenues

Advance Auto Parts reported adjusted earnings of $1.89 per share in third-quarter 2018 (ended Oct 6, 2018), up from $1.43 in the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $1.77. Adjusted operating income increased 12.5% year over year to $193.7 million.

Advance Auto Parts reported net revenues of $2.3 billion, beating the Zacks Consensus Estimate of $2.23 billion. Revenues were 4.3% higher than the year-ago quarter. During the quarter under review, comparable store sales were 4.6% higher year over year. This marks strongest comparable sales growth in eight years for the company.

Gross profit was $1.01 billion in the reported quarter, higher than the prior-year quarter figure of $947.7 million. Gross Profit margin increased 90 basis points year over year to 44.3%.

Adjusted selling, general and administrative (SG&A) expenses totaled $813.8 million compared with $775.5 million in the year-ago period.



Financial Position

Advance Auto Parts had cash and cash equivalents of $970 million as of Oct 6, 2018, up from $363.3 million as of Oct 7, 2017. The total long-term debt was $1.05 billion as of Oct 6, 2018, higher than $1.04 billion as of Dec 30, 2017.

In third-quarter 2018, operating cash flow was $681.5 million compared with $401 million in the same period of 2017.

Dividend & Share Repurchase

On Nov 7, 2018, Advance Auto Parts’ board approved a cash dividend of 6 cents per share to be paid on Jan 4, 2019, for shareholders of record as of Dec 21, 2018.

On Aug 8, 2018, the board of directors authorized a $600-million share repurchase program, replacing the existing $500-million share repurchase program. In the third quarter, the company bought back 720 thousand shares for $119.9 million. At the end of third-quarter 2018, Advance Auto Parts had $480.1 million remaining under the share repurchase program.

Store Update

As of Oct 6, 2018, Advance Auto Parts operated 4,981 stores and 139 Worldpac branches, and served approximately 1,229 independently-owned Carquest stores.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Advance Auto Parts has a strong Growth Score of A, a grade with the same score on the momentum front. However, 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Advance Auto Parts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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