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Advance Auto Parts (AAP) to Post Q1 Earnings: What's in Store?

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Advance Auto Parts, Inc. (AAP - Free Report) is slated to release first-quarter 2020 results on May 19, before the bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.65 per share on revenues of $2.78 billion.

Over the trailing four quarters, Advance Auto Parts missed estimates on three occasions and beat in the other — the average positive surprise being 4.09%. This is depicted in the graph below:

Advance Auto Parts, Inc. Price and Consensus

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for first-quarter earnings per share has been revised downward by a penny in the past 30 days to $1.65. The figure indicates a year-over-year decrease of 32.93%. Further, the Zacks Consensus Estimate for revenues suggests a year-over-year decline of 5.96%.

What the Zacks Model Says

Our proven model predicts an earnings beat for Advance Auto Parts this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Advance Auto Parts has an Earnings ESP of +13.98%. This is because the Most Accurate Estimate of $1.88 per share comes in 23 cents higher than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Advance Auto Parts carries a Zacks Rank of 3 currently.

Key Factors

Advance Auto Parts — the peers of which include OReilly Automotive Inc (ORLY - Free Report) , US Auto Parts Network Inc (PRTS - Free Report) and AutoZone Inc (AZO - Free Report) — is anticipated to have gained from the expansion of its footprint through new stores, widening online presence and collaborations in the first quarter. The company’s acquisition of Sears’ DieHard brand is likely to have helped the company enhance the brand portfolio and drive more traffic to its stores. Also, the company’s Speed Perks 2.0 program is anticipated to have provided its employees with data insights during the quarter under review.

Further, Advance Auto Parts is likely to have undertaken several initiatives to strengthen and streamline its supply chain to meet the evolving need of customers in the first quarter. This is likely to have helped the company unlock its long-term margin expansion during the March-end quarter.

However, heightening coronavirus fears, especially in March, are likely to have thwarted vehicle demand, in turn dampening demand for automotive replacement parts (excluding tires), accessories, batteries and maintenance items. Advance Auto Parts withdrew the 2020 guidance and suspended its share-buyback program until further notice amid significant deterioration of the macro-economic environment.

Also, the company’s massive costs for store openings, partnerships and investments to strengthen the supply chain are likely to have flared up expenses in the to-be-reported quarter. Further, rise in raw-material (especially aluminium and steel) costs amid trade tariffs might have clipped the firm’s profit margin.

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