Investors Punish Advance Auto Parts, Inc. (AAP) on Earnings Miss


Advance Auto Parts, Inc. (NYSE:AAP) investors battered the shares of the auto parts maker on Monday, after the company reported weaker-than-expected profit for the second quarter. Specifically, adjusted profit of $1.58 a share fell short of an estimated $1.65. In addition, Advance expects comparable-store sales to drop between 1% and 3% this year, wider than consensus estimates of a decline of 0.5%.

CEO Tom Greco commented, “We delivered sales growth and continued to close the comp sales performance gap versus the industry in Q2 while more than doubling year to date Free Cash Flow. Our revised guidance for the year incorporates the impact of industry headwinds in the first half, which we expect to continue in the second half of the year and we are taking the appropriate actions to adapt to this environment. We’ve now assembled a world class leadership team that is executing our transformation plan to significantly drive growth and long term shareholder value.”

Guggenheim analyst Steven Forbes said, “Since our initiation in January, we have believed that simultaneously driving both improved top-line and bottom-line momentum was an overly optimistic outlook given the amount of reinvestment needed to reposition the business for long-term success. In our view, the industry headwinds that have been highlighted by AAP’s public peers will only further complicate the margin dynamics associated with the company’s recovery. As a result, we remain on the sidelines and await additional color around the impact these headwinds will have on the company’s ability to flow-through the productivity initiatives it laid out earlier this year.”

Shares of Advance Auto Parts are currently trading at $82.64, down $26.68 or -24.41%. AAP has a 1-year high of $177.83 and a 1-year low of $84.60. The stock’s 50-day moving average is $108.27 and its 200-day moving average is $136.98.

On the ratings front, AAP has been the subject of a number of recent research reports. In a report issued on August 9, Jefferies analyst Bret Jordan reiterated a Buy rating on AAP, with a price target of $130, which represents a potential upside of 41% from where the stock is currently trading. On August 7, UBS’s Michael Lasser reiterated a Buy rating on the stock and has a price target of $155.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Bret Jordan and Michael Lasser have a yearly average return of 6.8% and 3.7% respectively. Jordan has a success rate of 65% and is ranked #1004 out of 4618 analysts, while Lasser has a success rate of 55% and is ranked #1173.

Sentiment on the street is mostly bullish on AAP stock. Out of 11 analysts who cover the stock, 6 suggest a Buy rating , 3 suggest a Sell and 2 recommend to Hold the stock. The 12-month average price target assigned to the stock is $132.00, which represents a potential upside of 43% from where the stock is currently trading.

Advance Auto Parts, Inc. operates as a retailer of automotive aftermarket parts, accessories, batteries and maintenance items. Its stores carry an extensive product line for cars, vans; sport utility vehicles and light trucks.

 

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