On Aug 7, 2014, we issued an updated report on Advance Auto Parts Inc. (AAP). This Zacks Rank #3 (Hold) stock reported positive earnings surprises in the trailing 4 quarters with an average beat of 9.09%.
Advance Auto Parts enhances profits through its relentless focus on store expansion. During the first quarter of 2014, the company opened 22 and closed 9 stores. Additionally, it acquired 1,336 Carquest stores and Worldpac branches as part of the acquisition of General Parts International Inc., a leading privately held distributor and supplier of original equipment and aftermarket replacement products for commercial markets, under the CARQUEST and WORLDPAC brands. The increase in store count ensures higher availability of parts to customers, thereby translating into increased sales.
Also, Advance Auto Parts focuses on operational initiatives aimed at improving sales and productivity. The automaker completed the acquisition of General Parts which has positioned it as the largest after-market auto parts retailer in North America.
Separately, the company raised its guidance for 2014 comparable cash earnings per share to the range of $7.30–$7.50 from the prior guidance of $7.20–$7.40 based on synergies from the integration of General Parts and favorable business momentum. Further, the guidance reflects a rise from $5.67 earned in 2013.
Moreover, sales are poised to benefit from the General Part acquisition, store base expansion and supply chain efficiencies. The company also intends to open 120 to 140 new Advance Auto Parts stores, Autopart International stores and WORLDPAC branches in 2014.
Advance Auto Parts is expected to report second-quarter earnings on Aug 14. The Zacks Consensus Estimate for earnings is pegged at $2.01 per share, up 26.17% year over year.
Key Picks from the Sector
Some better-ranked auto stocks worth considering include CarMax Inc. (KMX), O'Reilly Automotive Inc. (ORLY) and Pep Boys – Manny, Moe & Jack (PBY). All these stocks carry a Zacks Rank #2 (Buy).
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