On Apr 18, we maintained our Neutral recommendation on
Advance Auto Parts Inc.
) based on its continuous focus on enhancing supply chain by
pursuing aggressive store expansion strategy and share repurchase
policy, which is expected to boost earnings. However, we are
concerned about the sluggish economy, volatile gasoline prices
and pricing pressures.
On Feb 7, Advance Auto posted a 2.2% decrease in earnings per
share to 88 cents in the fourth quarter of 2012 from 90 cents in
the year-ago quarter. However, reported EPS surpassed the Zacks
Consensus Estimate by 13 cents.
Revenues remained flat year over year at $1.3 billion, in line
with the Zacks Consensus Estimate. Flat revenues reflect a 1.9%
decrease in comparable store sales versus a 2.9% rise during the
fourth quarter of 2011, partially offset by the positive impact
of net addition of 132 stores over the past 12 months.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for 2013 went down 1.1% to $5.52 per share.
The Zacks Consensus Estimate for 2014 also declined 1.1% to $6.07
per share. Currently, Advance Auto maintains a Zacks Rank #3
Advance Auto will benefit from its focus on different operational
initiatives, which will improve sales and productivity and
enhance market share of the company. These initiatives include
development of merchandising programs, better store remodeling
programs, nationwide advertising aimed at establishing the AAP
Advance Auto will be favorably impacted by the aggressive store
expansion strategy and share repurchase policy. During the fourth
quarter of 2012, Advance Auto Parts opened 67 stores, including 8
Autopart International stores. With this, the company has opened
137 stores, including 21 Autopart International stores, in 2012.
In 2012, Advance Auto Parts repurchased shares worth $27.1
million. As of Dec 29, 2012, the company had nearly $492 million
shares remaining under its $500 million share repurchase program,
which was authorized by the board on May 14, 2012.
However, sluggish economy and volatile gasoline prices are some
of the challenges facing the company. In addition, rising
competition from national and regional automotive retailers
) is a matter of concern for the company.
Other Stocks to Look For
Currently, CarMax Inc.
O'Reilly Automotive Inc.
) with Zacks Rank #2 (Buy) are performing well in the same
industry where Advance Auto Parts operates.
ADVANCE AUTO PT (AAP): Free Stock Analysis
AUTOZONE INC (AZO): Free Stock Analysis
CARMAX GP (CC) (KMX): Free Stock Analysis
O REILLY AUTO (ORLY): Free Stock Analysis
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