Advance Auto Parts Reports Q4 Beat & Better Than Expected Guidance

CFRA analysts downgraded Advance Auto Parts (NYSE:AAP) from Hold to Sell, citing disappointing third-quarter results and a bleak outlook for the company’s financial performance. The analysts also slashed the 12-month target price to $25 from $55, reflecting diminished growth expectations.

Advance Auto Parts reported an adjusted loss per share of $0.04 for the third quarter, falling well short of the Street consensus estimate of $0.54. Revenue dropped 3% year-over-year to $2.15 billion, missing projections by $520 million. Comparable store sales declined by 2.3%, underperforming expectations by 60 basis points. The weaker-than-anticipated top-line performance raised concerns about the company’s ability to stabilize its operations.

The company revised its 2024 guidance, projecting fourth-quarter net sales of $1.90 billion and an adjusted EPS loss between $1.50 and $0.90. Both figures are significantly below market expectations of $2.00 billion in revenue and a $0.06 EPS gain.

The analysts lowered earnings estimates for 2024 and 2025 to $0.10 and $1.40 per share, respectively, from previous estimates of $2.30 and $3.65. With the company resorting to asset sales and store closures to address operational inefficiencies, the outlook remains grim. CFRA expressed concern over Advance Auto Parts’ ongoing struggles to achieve stability, justifying the downgrade to Sell.

Advance Auto Parts, Inc. (NYSE:AAP), a leading automotive parts provider, faced a challenging second quarter, underperforming against market expectations. This downturn has raised alarms about the company's ongoing restructuring efforts, which aim to reverse its declining fortunes. Despite initiatives aimed at cost reduction, Advance Auto Parts continues to witness a squeeze in profit margins, a critical indicator of financial health. The decision to sell WorldPac, a move intended to strengthen the balance sheet, has also sparked debates about the company's strategic future direction.

Christopher Horvers from J.P. Morgan recently adjusted the price target for AAP to $55, marking an 11.18% decrease from its current trading price of $61.92. This revision, dated August 22, 2024, underscores the skepticism surrounding the company's ability to navigate its financial and operational hurdles effectively. The revised price target reflects the broader market's reaction to the company's second-quarter performance and its revised full-year guidance.

In the second quarter, Advance Auto Parts reported a revenue of approximately $2.68 billion, with a net income of $44.99 million. These figures, while substantial, highlight the challenges the company faces in improving its bottom line. The gross profit of about $1.11 billion and an operating income of $71.75 million, alongside an EBITDA of $71.75 million, further illustrate the financial strains. The earnings per share (EPS) stood at $0.75, a critical metric for investors assessing the company's profitability.

The cost of revenue, which amounted to roughly $1.57 billion, underscores the ongoing challenges in managing expenses effectively. With a pre-tax income of about $62.09 million and an income tax expense of around $17.10 million, the financial details reveal the intricacies of Advance Auto Parts' operational and financial management. These figures, while reflective of the company's current state, also underscore the importance of strategic decisions, such as the sale of WorldPac, in shaping its future trajectory.

As Advance Auto Parts navigates through these turbulent times, the focus remains on its ability to turn around its financial health and redefine its strategic direction. The recent adjustments in price targets and the detailed financial performance for the quarter shed light on the critical areas requiring attention. The company's efforts to enhance its balance sheet through strategic sales and cost reduction initiatives are pivotal steps toward stabilizing and potentially reversing its declining profit margins.

Advance Auto Parts (NYSE:AAP) shares plunged more than 25% yesterday after the company posted very weak Q1 results and revised its 2023 guidance well-below consensus driven by management's expectation for a continued challenging competitive environment.

Q1 EPS came in at $0.72, compared to the Street estimate of $2.56. Revenue was $3.4 billion, compared to the Street estimate of $3.43 billion. The company provided its outlook for fiscal 2023, expecting EPS to be in the range of $6.00-$6.50, compared to the Street estimate of $10.64, and revenue in the range of $11.2-11.3 billion, compared to the Street estimate of $11.43 billion.

Advance Auto Parts (NYSE:AAP) reported its Q4 results, with EPS of $2.88 beating the Street estimate of $2.43. Revenue was $2.5 billion, above the Street estimate of $2.42 billion.

The company provided its full 2023 year outlook, expecting revenue in the range of $11.4-11.6 billion, compared to the Street estimate of $11.33 billion.

According to the analysts at RBC Capital, visibility into the company's forward margin trajectory remains limited, feeding into the current valuation gap vs. peers. With an unclear margin outlook and uncertainty around where new leadership may be focused, the analysts believe shares are likely to trade sideways near-term. The analysts maintained their Sector Perform rating and $158 price target on the company’s shares.

Advance Auto Parts, Inc. (NYSE:AAP) shares dropped nearly 10% on Wednesday following the company’s reported Q2 results, with EPS coming in at $3.74, worse than the Street estimate of $3.76. Revenue was up 0.6% year-over-year to $2.7 billion, below the Street estimate of $2.75 billion.

Analysts at Oppenheimer said they look upon Q2 results and updated 2022 guidance as largely mixed. According to the analysts, somewhat better than planned margins offset modestly weaker than expected sales.

For a long while, the company has represented the turnaround opportunity amongst leading auto parts retail chains. The analysts said they admire the efforts of CEO Tom Greco and his team to reposition the company successfully.