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Advance Auto Parts (AAP) Down 1.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Advance Auto Parts (AAP - Free Report) . Shares have lost about 1.7% 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 catalysts.

Advance AutoParts’ Q3 Earnings & Revenues Beat Estimates

Advance Auto Parts reported adjusted earnings of $2.10 per share in third-quarter 2019 (ended Oct 5, 2019), up 11.1% from the prior-year quarter’s level. The figure surpassed the Zacks Consensus Estimate of $2.07. Adjusted operating income increased 5.9% year over year to $205.1 million.

Advance Auto Parts generated net revenues of $2,312 million, which surpassed the Zacks Consensus Estimate of $2,298 million. Revenues improved 1.6% from the year-ago quarter’s tally. During the quarter under review, comparable store sales increased 1.2% year over year.

Adjusted selling, general and administrative (SG&A) expenses totaled $810 million compared with $814 million in the year-ago quarter, mainly aided by improvement in labor costs, occupancy expenses and insurance claims.

Financial Position

Advance Auto Parts had cash and cash equivalents of $573.7 million as of Oct 5, 2019, compared with $896.5 million as of Dec 29, 2018. Total long-term debt was $747 million as of Sep 30, 2019, compared with $1.05 billion as of Dec 29, 2018. The debt-to-capital ratio stands at 17.7%, as of Oct 5, 2019.

In third-quarter 2019, operating cash flow was $708.5 million, up from $681.5 million in the prior-year quarter.

Dividend & Share Repurchase

On Nov 8, 2019, Advance Auto Parts’ board approved cash dividend of 6 cents per share to be paid on Jan 3, 2020, to all common shareholders of record as of Dec 20, 2019. The company also authorized $700 million as an addition to the existing share repurchase program.

Store Update

As of Oct 5 2019, the company operated 4,891 stores and 152 Worldpac branches as well as served approximately 1,260 independently-owned Carquest branched stores across Mexico, the Bahamas, Turks and Caicos, and British Virgin Islands.

Guidance

The company reiterated its guidance for 2019. For the year, it anticipates consolidated revenues in the range of $9,650-$9,750 million. Further, adjusted operating income margin projection is maintained at the band of 8-8.2% and capital expenditure is estimated at $250-$300 million.



 

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Advance Auto Parts has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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 B. 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 this revision has been net zero. 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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