Advance Auto Parts' Q4 Earnings Miss Estimates, Rise Y/Y - Analyst Blog
Advance Auto Parts Inc. (AAP) reported a 45.7% rise in adjusted comparable earnings to $1.37 per share in the fourth quarter of fiscal 2014 (ended Jan 3, 2015) from 94 cents in the prior-year quarter. However, the figure missed the Zacks Consensus Estimate of $1.48 per share.
Advance Auto Parts Inc. - Earnings Surprise | FindTheBest
Adjusted net earnings rose 46.9% to $101 million from $68.7 million in the fourth quarter of fiscal 2013.
Including amortization of acquired intangible assets of 8 cents, integration costs of 30 cents related to the acquisition of General Parts International, integration expenses of 1 cent for B.W.P. Distributors and 17 cents for additional week of business, earnings per share (on a reported basis) stood at $1.15 as against 67 cents in the year-ago quarter.
Revenues went up 48.1% year over year to $2.09 billion, missing the Zacks Consensus Estimate of $2.28 billion. The year-over-year increase in sales was driven by benefits from General Parts’ takeover, increase in comparable same-store sales and the addition of new stores over the last 12 months. Meanwhile, comparable store sales increased 1.1% in the reported quarter, compared with 0.1% in the prior-year quarter.
Gross profit increased 33.4% to $936.2 billion, or 44.9% of sales in the quarter, compared with $701.8 million or 49.8% of sales a year ago. The decrease in gross profit margin can be attributed to a higher mix of commercial sales (which has a lower gross margin rate), partly offset by acquisition synergy savings in the reported quarter.
Comparable selling, general and administrative expenses (SG&A) totaled $764.5 million or 36.6% of sales in the quarter under review, compared with $587.9 million or 41.7% of sales in the fourth quarter of fiscal 2013. The decline resulted from acquisition of General Parts’ business (which has low SG&A costs), combined with lower incentive compensation expenses.
Comparable operating income increased 50.8% to $171.7 million from $113.9 million in the fourth quarter of fiscal 2013. Operating margin stood at 8.2% versus 8.1% a year ago.
Fiscal 2014 Performance
Advance Auto Parts’ comparable earnings increased 33.9% year over year to $7.59 per share for fiscal 2014 from $5.67 recorded in fiscal 2013. However, earnings missed the Zacks Consensus Estimate of $7.72. Revenues for full-year 2014 increased 49.3% to $9.69 billion from $6.49 billion in 2013, but missed the Zacks Consensus Estimate of $9.88 million.
Store Openings
During the 53-week period ended Jan 3, 2015, Advance Auto Parts opened 151 stores and closed 19. Also, the company acquired 1,336 Carquest stores and Worldpac branches as part of its acquisition of General Parts on Jan 2, 2014.
As of Jan 3, 2015, the company’s total store count stood at 5,372, including 111 Worldpac branches. Advance Auto Parts served roughly 1,325 independently owned Carquest stores as of that date.
Dividend
The board of directors of Advance Auto Parts declared a regular quarterly dividend of 6 cents per share to be paid on Apr 3, 2015 to stockholders of record as of Mar 20.
Financial Position
Advance Auto Parts had cash and cash equivalents of $104.7 million as of Jan 3, 2015, implying a significant decline from $1.1 billion as of Dec 28, 2013. Total long-term debt increased to $1.64 billion as of Jan 3, 2015, from $1.05 billion as of Dec 28, 2013. The long-term debt-to-capitalization ratio stood at 45% versus 41% as of Dec 28, 2013.
In fiscal 2014, operating cash flow increased to $708.9 million from $545.3 million in fiscal 2013. Free cash flow in the period amounted to $480.5 million versus $349.5 million last year. Capital expenditures in the concerned period amounted to $227.5 million, compared with $195 million a year ago.
Outlook
Advance Auto Parts expects to open 100–120 new stores (including Worldpac stores) in fiscal 2015. The company anticipates comparable store sales growth in the low-single digits. Adjusted earnings per share are likely to be in the range of $8.35–$8.55 in fiscal 2015.
In addition, Advance Auto Parts expects income tax rate to be 37.5%–38%. Capital expenditure will range from $325 million to $340 million and free cash flow is expected to be about $475 million.
Advance Auto Parts currently carries a Zacks Rank #3 (Hold). Better-ranked auto stocks include CarMax Inc. (KMX), Toyota Motor Corporation (TM) and O'Reilly Automotive Inc. (ORLY). While CarMax sports a Zacks Rank #1 (Strong Buy), both Toyota and O'Reilly carry a Zacks Rank #2 (Buy).
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