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Advance Auto (AAP) Q3 Earnings Miss, FCF & Profit View Cut

Advance Auto Parts, Inc. AAP reported adjusted earnings of $2.84 per share for third-quarter 2022 (ended Oct 8, 2022), down 11.5% from the year-ago quarter figure. The reported figure also missed the Zacks Consensus Estimate of $3.32 a share. Advance Auto generated net revenues of $2,641.3 million, falling short of the Zacks Consensus Estimate of $2,652 million and inching down 0.8% from the year-ago reported figure.

Comparable same-store declined 0.7%. Adjusted operating income was down 5.8% year over year to $258 million. Adjusted SG&A expenses totaled $989.3 million for third-quarter 2022, up 5.4% year over year.

Advance Auto Parts currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Financial Position

Advance Auto had cash and cash equivalents of $191.2 million as of Oct 8, 2022 compared with $601.4 million on Jan 1, 2022. Total long-term debt was $1,187.9 million as of Oct 8, 2022, up from $1,034.3 million on Jan 1, 2022. Year to date, net cash provided by operating activities and FCF totaled $483.1 million $149.5 million, respectively.

Dividend & Share Repurchase

AAP’s board declared a cash dividend of $1.50 a share, which would be paid out on Jan 3, 2023 to all common shareholders of record as of Dec 16, 2022.

During the quarter under discussion, AAP repurchased around 0.4 million shares for $75 million at an average price of $168.93 per share. At the end of third-quarter 2022, AAP had $ 1 billion remaining under its share repurchase program.

Store Update

As of Oct 8, 2022, AAP operated 4,747 stores and 313 Worldpac branches in the United States, Canada, Puerto Rico, and U.S. Virgin Islands. It also served 1,335 independently-owned Carquest-branded stores across these locations, in addition to Mexico and various Caribbean Islands.

2022 Guidance

Advance Auto estimates 2022 net sales in the band of $11-$11.2 billion. Comparable store sales are now envisioned to decline up to 1% as against the prior forecast of 1-3% growth. Adjusted operating income margin is envisioned in the range of 9.8-10%. Advance Auto expects 2022 capex to be a minimum of $350 million. The company now targets an FCF of a minimum of $300 million, down from $700 million estimated earlier. Adjusted EPS is now forecast between $12.60 and $12.80, down from the previously guided range of $12.75-$13.25. The auto parts retailer now intends to buy back a maximum of $600 million worth of shares in 2022. It aims to open 125-150 new stores this year.

How Did Peer ORLY Fare in Q3?

Advance Auto’s close peer O’Reilly Automotive ORLY reported second-quarter 2022 adjusted earnings per share of $9.17, beating the Zacks Consensus Estimate of $8.46. Higher-than-expected comps growth resulted in the outperformance. Comps grew 7.6% in the reported quarter and topped the Zacks Consensus Estimate of 4.79%. The bottom line increased 13.6% from $8.07 in the prior-year quarter. The automotive parts retailer registered quarterly revenues of $3,799.6 million, crossing the consensus mark of $3,713 million. The top line was 9% higher than the prior-year figure of $3,479.5 million.

For 2022, ORLY’s estimates have been revised. Total revenues are now expected within the range of $14.1-$14.3 billion compared with the prior guidance of $14-$14.3 billion. Earnings per share are pegged within $32.35-$32.85, up from $31.25-$31.75 estimated earlier. The forecast for comparable store sales growth has been brought up to the range of 4.5-5.5% from the previous band of 3-5%. Free cash flow projection has also been increased to the band of $1.8-$2.1 billion from the prior range of $1.3-$1.6 billion.


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