Advance Auto Parts, Inc. (NYSE:AAP) shares fell 7.4% to US$157 in the week since its latest third-quarter results. Revenues were in line with forecasts, at US$2.3b, although earnings per share came in 14% below what analysts expected, at US$1.75 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Advance Auto Parts from 23 analysts is for revenues of US$9.95b in 2020, which is a credible 2.6% increase on its sales over the past 12 months. Earnings per share are expected to surge 44% to US$8.90. Yet prior to the latest earnings, analysts had been forecasting revenues of US$9.96b and earnings per share (EPS) of US$9.01 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
There were no changes to revenue or earnings estimates or the price target of US$173, suggesting that the company has met expectations in its recent result. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Advance Auto Parts analyst has a price target of US$215 per share, while the most pessimistic values it at US$132. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Advance Auto Parts shareholders.
In addition, we can look to Advance Auto Parts's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. One thing stands out from these estimates, which is that analysts are forecasting Advance Auto Parts to grow faster in the future than it has in the past, with revenues expected to grow 2.6%. If achieved, this would be a much better result than the 0.3% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.8% per year. Although Advance Auto Parts's revenues are expected to improve, it seems that analysts are still bearish on the business, forecasting it to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Advance Auto Parts's revenues are expected to perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Advance Auto Parts going out to 2021, and you can see them free on our platform here..
It might also be worth considering whether Advance Auto Parts's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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