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Advanced Auto (AAP) Earnings Preview

by | May 30, 2021

Advanced Auto (AAP) reporting earnings on Wednesday before the open with the Street looking for $3.08 on $3.3B in sales. Next quarter is guided to $2.66 and $2.47B while the FY is $10.30 and $10.46B, a 3.5% increase Y/Y. Shares have closed higher in four of the last five with an average closing move of 3% and max move of 7.51%. The current implied move is 5%. The $12.54B company trades 16X earnings, 1.24X sales and 15X cash with a 2.11% yield. AAP is seeing strength across the board with both DIY and professional sales while DieHard is driving record battery sales. They expect miles driven to continue improving throughout the year which will be a tailwind for their Pros business. AAP has also become a margin improvement story recently as they improve their supply chain, expand their brand assortments, and optimize SG&A. Hedge fund ownership fell 9% in Q1. Analysts have an average target for shares of $193 with a Street High $230. CSFB starting coverage at Outperform recently while Goldman double-upgraded shares to Buy in early May. The firm thinks the auto parts retailers will benefit from an economic re-opening, despite strong comps in auto parts retail in 2020, while in a highly inflationary environment, the auto parts space is preferred given its unique ability to pass-through higher costs to customers.

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