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Advance Auto (AAP) Rides On Store Openings Amid Expense Woes

Zacks Equity Research

We issued an updated research report on Advance Auto Parts, Inc. AAP on Jun 3.

This automotive aftermarket player focuses on expanding its footprint by opening new stores, widening online presence and strategic collaborations. In sync with this strategy, the company announced an alliance with the Midwest Auto Care Alliance in January 2019 to provide automotive parts and training support to its member facilities. In October 2018, Advance Auto partnered with Walmart.com to create an automotive specialty store on Walmart.com.

In first-quarter 2019, the company reported adjusted earnings of $2.46 per share, up 17.1% from that of the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $2.36. Also, during the quarter, it reported net revenues of $3 billion, surpassing the Zacks Consensus Estimate of $2.9 billion. Revenues were 2.7% higher than the year-ago quarter.

However, huge capital expenditure is a concern for the company. Funding of its plans — including acquisition, store openings and investments to develop supply chain — are leading to increased expenses. For 2019, the company expects capital expenditure to be $250-$300 million.

Over the past 30 days, the Zacks Consensus Estimate for current-year earnings has increased 1.4% to $8.22.

In the past three months, shares of Advance Auto have underperformed the industry it belongs to. Over this time frame, the stock has gained 6.5% while the industry rose by 0.5%.




Advance Auto currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the auto space are Ford Motor Company F, Fox Factory Holding Corp. FOXF and Cummins Inc. CMI, each currently carrying a Zacks Rank #2 (Buy). You can see tthe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ford has an expected long-term growth rate of 7.3%. Over the past three months, shares of the company have gained 12.1%.

Fox Factory has an expected long-term growth rate of 16.4%. Over the past three months, shares of the company have gained 5.5%.

Cummins has an expected long-term growth rate of 8%. Over the past three months, shares of the company have gained 3.5%.

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