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What's in Store for Advance Auto Parts' (AAP) Q3 Earnings?

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Advance Auto Parts, Inc. AAP is slated to announce third-quarter 2020 results on Nov 10, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $2.63 per share on revenues of $2.48 billion.

This aftermarket auto parts distributor delivered better-than-anticipated earnings in the last reported quarter on stellar comparable store sales year-on-year growth.

Over the trailing four quarters, Advance Auto Parts surpassed estimates on three occasions and missed in the other — the average beat being 6.7%. This is depicted in the graph below:

Advance Auto Parts, Inc. Price and EPS Surprise

Advance Auto Parts, Inc. Price and EPS Surprise
Advance Auto Parts, Inc. Price and EPS Surprise

Advance Auto Parts, Inc. price-eps-surprise | Advance Auto Parts, Inc. Quote

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for Advance Auto Parts’ third-quarter earnings per share has been revised upward by four cents in the past 30 days to $2.63. Moreover, this compares favorably with the year-ago quarter’s earnings of $2.10, indicating a 25.2% jump year on year. Further, the Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 7.16%.

Earnings Whispers

Our proven model predicts an earnings beat for Advance Auto Parts this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This has been elaborated below.

Earnings ESP: Advance Auto Parts has an Earnings ESP of +6.13%. This is because the Most Accurate Estimate is pegged 16 cents higher than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Factors at Play

Amid the gradual recovery of the economy from the coronavirus crisis, vehicle demand across the globe started to rebound during the third quarter. This, in turn, is anticipated to have boosted demand for automotive replacement parts, accessories, batteries and maintenance items. This is likely to have buoyed Advance Auto Parts’ bottom line during the quarter under review.

Advance Auto Parts is likely to have gained from the digital ramp-up and rising e-commerce initiatives during the third quarter. The firm’s significant advancement on its DIY omni-channel digital platform is anticipated to have fueled its earnings in the to-be-reported quarter.
Further, Advance Auto Parts — peers of which include OReilly Automotive Inc ORLY, CarMax Inc KMX and AutoZone Inc AZO — is likely to have benefited from its strengthening foothold through the opening of new stores during the quarter in discussion. Notably, the Zacks Consensus Estimate of the total number of retail stores at the end of the third quarter is 4,978, up from the second quarter’s store count of 4,819.

Moreover, Advance Auto Parts’ buyout of Sears’ DieHard brand has enhanced its brand portfolio by enabling the company to sell DieHard batteries. This is likely to have steered more traffic to its stores during the quarter in discussion, in turn, boosting its top line.
Further, the company has undertaken several cost-containment initiatives like temporary furloughs and compensation cuts to combat the mayhem caused by the pandemic. These measures are likely to have helped the company strengthen its bottom line during the September-end quarter.

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