Advance Auto Parts Posts Better-Than-Expected Q3 Results

Advance Auto Parts, Inc. (AAP) posted better-than-expected third-quarter results with earnings beating estimates by a huge margin.However, shares of the leading automotive aftermarket parts provider slipped by more than 1% today at the time of writing.

Better-Than-Expected Results

The company reported adjusted earnings of $3.21 per share, up 21.6% year-over-year, significantly outpacing analysts’ estimates of $2.82 per share.

Additionally, net sales rose 3.1% year-over-year to $2.62 billion, surpassing analysts’ estimates of $2.56 billion. Similarly, AAP’s comparable-store sales also grew 3.1% compared to the prior-year period. The strong sales growth was primarily driven by continuing momentum in the company’s professional business and modest growth in the DIY omnichannel business.

Management Comments

Tom Greco, President and CEO of AAP, said, “Following several years of investments in both our team as well as our diversified physical and digital asset base, we continue to differentiate Advance in the marketplace.”

Greco concluded, “We’re encouraged by the positive sales trends during the first four weeks of our fourth quarter with our two-year stack remaining in line with Q3. We look forward to finishing 2021 with momentum and remain confident in our ability to drive total shareholder return in the coming years.”

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Updated Guidance

Based on the ongoing business environment and higher than expected inflation headwinds, the company increased its full-year fiscal 2021 guidance.

For FY21, AAP now forecasts net sales in the range of $10.9 billion to $10.95 billion, higher than the consensus estimate of $10.83 billion. However, the company reduced its new store openings count to a minimum of 30 stores from the prior guidance of 80-120 stores.

Analysts’ Take

Responding to AAP’s quarterly performance, Wells Fargo analyst Zachary Fadem maintained a Hold rating on the stock with a price target of $235, which implies 2.9% downside potential to current levels.

Fadem said, “While AAP delivered another very impressive print, tonight’s pullback seems about right following recent share strength, a likely conservative Q4 outlook and Q3 results that met, but didn’t beat elevated buy-side expectations.”

Overall, the stock commands a Strong Buy consensus rating based on 9 Buys and 3 Holds. At the time of writing, the average Advance Auto Parts price target was $244.75, which implies 1.2% upside potential to current levels. Meanwhile, shares have gained 60.1% over the past year.

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