A month has gone by since the last earnings report for Advance Auto Parts (AAP). Shares have lost about 1.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Advance Auto Parts due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Advance Auto Parts Q4 Earnings Beat Estimates, Up Y/Y
Advance Auto Parts reported adjusted earnings of $1.17 per share in fourth-quarter 2018 (ended Dec 29, 2018), up from 77 cents in the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $1.14. Adjusted operating income increased 11.7% year over year to $127.1 million.
Advance Auto Parts reported net revenues of $2.1 billion, almost in line with the Zacks Consensus Estimate. Revenues were 3.3% higher than the year-ago quarter. During the quarter under review, comparable store sales were 3.4% higher year over year.
Gross profit was $928.6 million in the reported quarter, higher than the prior-year quarter figure of $873.6 million. Gross Profit margin increased 120 basis points year over year to 44.1%.
Adjusted selling, general and administrative (SG&A) expenses totaled $802.4 million compared with $759.9 million in the year-ago period.
For 2018, Advance Auto Parts reported adjusted earnings per share of $7.13, up from the 2017 figure of $5.37.
For 2018, revenues were $9.6 billion, up from the 2017 figure of $9.4 billion.
Advance Auto Parts had cash and cash equivalents of $896.5 million as of Dec 29, 2018, up from $546.9 million as of Dec 30, 2017. The total long-term debt was $1.05 billion as of Dec 29, 2018, higher than $1.04 billion as of Dec 30, 2017.
In fourth-quarter 2018, operating cash flow was $811 million, up 35% year over year.
Dividend & Share Repurchase
On Feb 11, 2019, Advance Auto Parts’ board approved a cash dividend of 6 cents per share to be paid as of Apr 5, 2019, for shareholders of record as of Mar 22, 2019.
On Aug 8, 2018, the board of directors authorized a $600-million share repurchase program, replacing the existing $500-million share repurchase program. Under this program, the company repurchased 1.7 million shares for $272.8 million in 2018. Subsequently, it also bought back 0.8 million common shares for $172.2 million. Presently, Advance Auto Parts has $200 million remaining under the share repurchase program.
As of Dec 29, 2018, Advance Auto Parts operated 4,966 stores and 143 Worldpac branches, and served approximately 1,231 independently-owned Carquest stores.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Advance Auto Parts has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Advance Auto Parts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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