On Jun 23, 2015, shares of Advance Auto Parts Inc. AAP reached a 52-week high of $165.00, before eventually closing at $163.89. The closing price represents a year-to-date return of 3.4%.
Share Price Drivers
Share price of Advance Auto Parts has been mostly moving upward since the company reported a strong year-over-year increase in earnings and revenues in the first quarter of fiscal 2015 (ended Apr 25, 2015). The company recorded a 6.2% rise in adjusted comparable earnings to $2.39 per share in the quarter from $2.25 in the prior-year quarter. Revenues went up 2.3% year over year to $3.04 billion. The year-over-year rise in sales was driven by benefits from the addition of new stores over the last 12 months and an increase in comparable store sales.
Advance Auto Parts uses its significant cash flow to open new stores every year. During the 16-week period ended Apr 25, 2015, the company opened 25 stores. Also, it consolidated 40 stores. As of Apr 25, 2015, Advance Auto Parts’ total store count stood at 5,350, including 115 Worldpac branches. Advance Auto Parts served roughly 1,300 independently owned Carquest stores as of that date. The company intends to collectively open 100–120 new stores (including Worldpac stores) in fiscal 2015. The increase in store count ensures greater availability of parts to customers, thereby leading to higher sales volume.
Advance Auto Parts is also poised to benefit as the industry continues to show stability, with the increasing average age of vehicles, along with a rise in the number of miles driven. The average age of cars on the U.S. roads is rising (more than 11 years). This is leading to an increase in the demand for auto parts. In addition, the combination of a steadily improving job market and low gasoline prices is positively impacting the company’s results.
Currently, Advance Auto Parts carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the auto industry include O'Reilly Automotive Inc. ORLY, U.S. Auto Parts Network, Inc. PRTS and Autoliv, Inc. ALV, all carrying a Zacks Rank #2 (Buy).
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