Advance Auto Parts (AAP) aims to improve its supply chain and vendor terms by pursuing an aggressive store expansion strategy. However, the sluggish economy, volatile gasoline prices and pricing are some of the challenges facing the company.
The company's profits fell 14.2% to $1.21 per share in the third quarter of the year due to weak sales in the cold weather markets; however, it was in line with the Zacks Consensus Estimate. The company also lowered its earnings outlook for 2012 due to the short-term softness in sales.
Our long-term Underperform recommendation on the stock indicates that it will perform below the broader market. Our $71.00 target price, 13.9X our 2012 EPS estimate, reflects this view.
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