Why Is Advance Auto Parts (AAP) Down 0.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Advance Auto Parts (AAP). Shares have lost about 0.1% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.
Advance Auto Parts’ Q3 Show Impresses
Advance Auto Parts reported adjusted earnings of $3.21 per share for third-quarter 2021 (ended Oct 9, 2021), increasing 21.6% from the prior-year figure. The reported figure also beat the Zacks Consensus Estimate of $2.78 on higher-than-expected comps growth. For the third quarter, comparable store sales witnessed 3.1% growth, outpacing the consensus mark of 0.2%. Advance Auto generated net revenues of $2,621.2 million, topping the Zacks Consensus Estimate of $2,564 million and rising 3.1% from the year-ago reported figure.
Adjusted operating income was up 6.9% year over year to $273.8 million. Adjusted selling, general and administrative expenses totaled $953.3 million compared with $871.6 million witnessed in the year-ago period.
Financial Position
Advance Auto had cash and cash equivalents of $604.6 million as of Oct 9, 2021 compared with $834.9 million on Jan 2, 2021. Total long-term debt was $1,034 million as of Oct 9, 2021, slightly up from $1,033 million on Jan 2, 2021.
From the beginning of the year till the third quarter (ending Oct 9), operating cash flow was $924.9 million, up 14.3% from the corresponding period of 2020. Free cash flow (FCF) through the third quarter came in at $734 million compared with the year-ago quarter’s $616.6 million.
Dividend & Share Repurchase
On Nov 9, Advance Auto Parts’ board approved a cash dividend of $1 per share. The dividend would be payable on Jan 3, 2022 to all common shareholders of record as of Dec 17, 2021. During the quarter, the company repurchased around 1.1 million shares for $228.3 million at an average price of $205.65 per share. At the end of third-quarter 2021, AAP had $640.5 million remaining under the share-repurchase program.
Store Update
As of Oct 9, it operated 4,727 stores and 234 Worldpac branches in the United States, Canada, Puerto Rico and U.S. Virgin Islands. It also served 1,325 independently-owned Carquest-branded stores across these locations, in addition to Mexico, the Bahamas, Grand Cayman, Turks and Caicos, and the British Virgin Islands.
Guidance for 2021
Advance Auto has raised its full-year 2021 view. It now estimates full-year net sales in the band of $10.9-$10.95 billion, up from the previous projection of $10.6-$10.8 billion. Comparable store sales growth and adjusted operating income margin are now envisioned in the range of 9.5-10% and 9.4-9.5%, higher than the previous projection of 6-8% and 9.2-9.4%, respectively. Advance Auto expects FCF of a minimum of $725 million, up from the previous forecast of a minimum of $700 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
Currently, Advance Auto Parts has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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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