It has been about a month since the last earnings report for Advance Auto Parts (AAP). Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Advance Auto Parts due for a pullback? 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’ Q1 Earnings & Sales Drop Y/Y
Advance Auto Parts reported adjusted earnings of 91 cents per share in first-quarter 2020 (ended Apr 18, 2020), significantly down 63% from the prior-year number. The earnings figure also missed the Zacks Consensus Estimate of $1.61.
Advance Auto Parts generated net revenues of $2,698 million, beating the Zacks Consensus Estimate of $2,664 million. However, the revenues dropped 8.6% from the year-ago quarter reported figure. During the first quarter, comparable store sales decreased 9.3% year on year.
Adjusted operating income slumped 57.2% year over year to $104.3 million. Adjusted selling, general and administrative (SG&A) expenses totaled $1,094 million compared with the $1,097 million witnessed in the year-ago quarter.
Advance Auto Parts had cash and cash equivalents of $1.3 billion as of Apr 18, 2020, compared with $418.7 million as of Dec 28, 2019. Total long-term debt was $1.24 billion as of Apr 18, 2020, compared with $747.32 million as of Dec 28, 2019.
Operating cash flow was $10.9 million as of Apr 18, 2020, down from the prior-year quarter’s $204.5 million.
Dividend & Share Repurchase
On May 15, Advance Auto Parts’ board approved a cash dividend of 25 cents per share to be paid on Jul 3, to all common shareholders of record as of Jun 13, 2020.
On Nov 8, 2019, the company authorized $700 million as an addition to the existing $400-million share-repurchase program. Under this program, the company repurchased 0.2 million shares of its common stock, at an aggregate amount of $29 million, for an average price of $128.36 per share. At the end of the first quarter, the company had $861.7 million remaining under the share-repurchase program. However, during the quarter, the company suspended its existing share-repurchase program on the coronavirus scare.
As of Apr 18, 2020, the company operated 4,843 stores and 168 Worldpac branches in the United States, Canada, Puerto Rico and the U.S. Virgin Islands. It also serves 1,258 independently-owned Carquest branded stores across these locations in addition to Mexico, the Bahamas, Turks and Caicos and British Virgin Islands.
Advance Auto Parts scrapped the 2020 guidance as it expects the coronavirus pandemic’s impact to strain its operations in the days to come.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 18.96% due to these changes.
Currently, Advance Auto Parts has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward 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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