On Jun 29, 2015, shares of Pep Boys – Manny, Moe & Jack PBY reached a 52-week high of $12.56, before eventually closing at $12.16. The closing price represents a year-to-date return of 24.1%.
Share Price Drivers
Share price of Pep Boys has been mostly moving upward since the company reported a strong year-over-year increase in earnings and revenues for the first quarter of fiscal 2015 (ended May 2, 2015). The company recorded adjusted earnings of 5 cents per share in the first quarter that surpassed the Zacks Consensus Estimate of 3 cents. Revenues for the 13 weeks ended May 2, 2015 inched up 0.6% to $542.3 million from $538.8 million in the 13 weeks ended May 3, 2014.
Pep Boys has adopted a long-term strategic plan, Road Ahead, to expand its business. Per this strategy, the company will remodel and undertake store growth programs in order to increase sales and enhance margins as well as return on invested capital. This will boost the company’s earnings and cash flow. In fiscal 2015, Pep Boys is expected to spend $60 million for the addition of 10–15 Service & Tire Centers and one Supercenter, along with the conversion of 25 stores to the Road Ahead format.
Pep Boys is benefiting as the industry continues to show stability, with the increasing average age of vehicles and a rise in the number of miles driven. The average age of cars on the U.S. roads is rising (more than 11 years at present). 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, Pep Boys sports a Zacks Rank #1 (Strong Buy).
Stocks to Consider
Other well-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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