Bear Of The Day: Advance Auto Parts

Advance Auto Parts (AAP) is a leading automotive aftermarket parts provider in North America, serving both the professional installer and do-it-yourself customers.

The company’s stores and branches offer a broad selection of brand names, original equipment manufacturer (OEM), and private label automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and more.

Analysts have taken a bearish stance on the company’s earnings outlook, pushing the stock into an unfavorable Zacks Rank #5 (Strong Sell).

(Click on image to enlarge)

Zacks Investment Research

Image Source: Zacks Investment Research

Let’s take a closer look at what’s been happening with the company.

 

Advance Auto Parts

Advance Auto Parts has posted weak quarterly results as of late, falling short of earnings and revenue expectations in two of its last three releases. In its latest print, the company missed EPS estimates by more than 70% and reported revenue marginally below the consensus.

As shown below, the market has consistently punished AAP shares post-earnings, with shares facing selling pressure following each of its last four prints. Down nearly 60% just over the previous year, the stock has been a bear’s dream.

(Click on image to enlarge)

Zacks Investment Research

Image Source: Zacks Investment Research

The company’s earnings are expected to take a sizable hit, with estimates for its current fiscal year (FY23) suggesting a 58% pullback. Still, earnings growth resumes in FY24, with estimates calling for a 15% recovery in earnings on 2.3% higher revenues.

(Click on image to enlarge)

Zacks Investment Research

Image Source: Zacks Investment Research

The company’s next quarterly release is expected on August 22nd: the Zacks Consensus EPS Estimate of $1.59 suggests a 57% decline in earnings from the year-ago quarter, with the estimate down nearly 16% just over the last 60 days.

Further, our consensus revenue estimate for the upcoming release stands at $2.7 billion, 0.3% higher than the year-ago quarter. It’s worth noting that the quarterly revenue estimate has been revised 2.3% lower since May.

 

Bottom Line

Negative earnings estimate revisions from analysts and weak quarterly results paint a challenging picture for the company’s shares in the near term.

Advance Auto Parts (AAP Quick QuoteAAP - Free Report) is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.

For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy) – these stocks sport a notably stronger earnings outlook paired with the potential to deliver explosive gains in the near term.


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