Advance Auto Parts Q3 Earnings: Can AAP Hit Its $2.06 EPS Target?

in EARNINGS/INVESTING IDEAS by

Advance Auto Parts, Inc. (NYSE:AAP) is scheduled to report Q3 earnings results on November 12, 2019. The company is expected to report earnings of $2.06/share on revenue of $2.301 billion. The consensus earnings per share (EPS) of $2.06/share is based on a poll of 22 analysts and represents a growth of 8.8% over the same quarter last year when the company reported earnings of $1.89/share.

The revenue forecast of $2.301 billion based on a poll of 18 analysts implies a year-over-year (YoY) growth of 1.1%. Last year the company reported $2.275 billion in revenue for the quarter.

Expected to report EPS growth of $0.17/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $2,300.60 $2,274.98 1.1%
EPS $2.06 $1.89 8.8%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarters.

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2019 $2.21 $2 -9.5% Missed
Q1, 2019 $2.37 $2.46 3.8% Beat
Q4, 2018 $1.13 $1.17 3.5% Beat
Q3, 2018 $1.75 $1.89 7.7% Beat
Q2, 2018 $1.85 $1.97 6.5% Beat
Q1, 2018 $1.96 $2.10 7.1% Beat
Q4, 2017 $0.64 $0.77 20.3% Beat
Q3, 2017 $1.20 $1.43 19.2% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-13 $142.16 $136.49 -4.0% Decline
2019-05-22 $161.30 $159.80 -0.9% Decline
2019-02-19 $169.99 $166 -2.3% Decline
2018-11-13 $167.06 $177.68 6.4% Increase

After the last earnings report for the period ending July 13, 2019, the stock price reacted by falling by -4.0%.

Fundamentals And Technical Analysis

Advance Auto Parts is currently trading at $168.82/share, up 0.8% for the day. The company is trading at approximately 90.7% of its 52 week high of $186.15/share. The company’s stock price is up 18.8% since the last earnings report and up 1.6% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 55.50 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 27.2x and a forward P/E multiple of 20.9x. Advance Auto Parts’s current share price also implies a price-to-book (P/B) multiple of 3.2x. The following table summarizes some other key fundamental ratios:

Data as of November 11, 2019
Metric Value
Last Fiscal Period FY2019.Q2
Period End Date July 13, 2019
Stock Price (Current) $168.82
P/E Ratio 27.2x
P/E Ratio (Fwd) 20.9x
PEG Ratio 2.1
Total Debt to Capital (%) 21.4%
Levered Free Cash Flow $615.9 million
Enterprise Value / EBITDA 15.1x

Company Profile: Advance Auto Parts, Inc.

Advance Auto Parts, Inc. is a large-cap stock with a market capitalization of $11.982 billion and a total enterprise value of $14.463 billion. The company operates in the Consumer Discretionary sector and Specialty Retail industry.

Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The company offers battery accessories, belts and hoses, brakes and brake pads, chassis and climate control parts, clutches and drive shafts, engines and engine parts, exhaust systems and parts, hub assemblies, ignition components and wires, radiators and cooling parts, starters and alternators, and steering and alignment parts.

The company also offers air conditioning chemicals and accessories, air fresheners, antifreeze and washer fluids, electrical wires and fuses, electronics, floor mats, seat covers, interior accessories, hand and specialty tools, lighting products, performance parts, sealants, adhesives and compounds, tire repair accessories, vent shades, mirrors and exterior accessories, washes, waxes and cleaning supplies, and wiper blades. In addition, the company offers air filters, fuel and oil additives, fuel filters, grease and lubricants, motor oils, oil filters, part cleaners and treatments, and transmission fluids for engine maintenance. Further, it offers battery and wiper installation, battery charging, engine light reading checking, electrical system testing, video clinic, oil and battery recycling, and loaner tool program services.

Additionally, the company sells its products through its Website. It serves professional installers and do-it-yourself customers. Advance Auto Parts, Inc. operates its stores under the Advance Auto Parts, Autopart International, Carquest, and Worldpac brand names.

As of July 13, 2019, the company operated 4,912 stores and 150 branches in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada; and served 1,250 independently owned Carquest branded stores in Mexico, the Bahamas, Turks and Caicos, and the British Virgin Islands.

Advance Auto Parts, Inc. was founded in 1929 and is based in Raleigh, North Carolina.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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