Advance Auto Parts Focuses on Expansion, Expenses a Woe

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On Jun 18, we issued an updated research report on Advance Auto Parts, Inc. AAP .

This leading automotive parts provider of North America is focusing on growth through store openings, collaborations and widening of online presence. The company rolled out an e-commerce engine known as Advance Pro, dedicated specifically to professional customers. During first-quarter 2018, the company's website helped it access 20,000 orders.

Further, to increase traffic at its stores and websites, the company has partnered with Uber Technologies in April. Under the partnership, Advance Auto Parts will serve as an exclusive aftermarket auto parts supplier for the Uber Visa Debit Card program to cater driver partners.

Advance Auto Parts, Inc. Price and Consensus

Advance Auto Parts, Inc. Price and Consensus | Advance Auto Parts, Inc. Quote

In first-quarter 2018, the company witnessed a year-over-year increase in adjusted earnings while revenues plunged. Moreover, earnings surpassed the Zacks Consensus Estimate while revenues missed the mark.

The company is also taking several initiatives to strengthen and streamline its supply chain with improving inventory positioning. Advance Auto Parts is also closing stores, depending upon the location, competency and real estate costs. As of Apr 21, 2018, it closed or consolidated 15 stores.

However, the company is incurring huge capital expenditure for expansion. In first-quarter 2018, the figure was $34 million. In the coming quarters, several ongoing or new projects might lead to an increase in the figure. For 2018, the company projects capital expenditure of $200-$250 million compared with roughly $189 million in 2017.

Also, Advance Auto Parts' dependence on seasonality and weather conditions for business is a headwind. In first-quarter 2018, the company was partially impacted by delayed spring in North, Central and northeast markets. This partly contributed to 0.6% year-over-year decline in revenues.

Over the past month, the company's stock has seen the Zacks Consensus Estimate for second-quarter 2018 earnings being revised 1.1% downward.

Price Performance

In the past three months, Advance Auto Parts' stock has moved up 19.3%, outperforming 11.9% increase of the industry it belongs to.

Zacks Rank & Stocks to Consider

Currently, Advance Auto Parts has a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Magna International Inc. MGA , Yamaha Motor Co. Ltd. YAMHF and Toyota Motor Corporation TM , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Magna has an expected long-term growth rate of 8.5%. Shares of the company have risen 47.7% over the past year.

Yamaha Motor has an expected long-term growth rate of 4.5%. Shares of the company have risen 3.8% over the past year.

Toyota has an expected long-term growth rate of 5.6%. Shares of the company have risen 31.5% over the past year.

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Toyota Motor Corporation (TM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: TM , AAP , MGA , YAMHF

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