Advance Auto Parts (AAP) Up 5.2% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Advance Auto Parts Inc (NYSE:AAP) . Shares have added about 5.2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Advance Auto Parts Q3 Earnings Top Estimates, Down Y/Y

Advance Auto Parts reported adjusted earnings of $1.43 per share in the third quarter of fiscal 2017 (ended Oct 7), declining 17.3% from $1.73 in the prior-year quarter. The figure, however, surpassed the Zacks Consensus Estimate of $1.22. Adjusted operating income declined to $172.2 million from $217.6 million in the third quarter of fiscal 2016.

Advance Auto Parts reported revenues of $2.18 billion, missing the Zacks Consensus Estimate of $2.21 billion. Revenues were 3% lower than the year-ago quarter figure. During the quarter, comparable store sales (comps) were down 3.4% year over year.

Gross profit declined to $947.7 million in the reported quarter from $988.2 million a year ago. Gross margin declined 51 basis points year over year to 43.4%.

Adjusted selling, general and administrative (SG&A) expenses totaled $775.5 million or 35.5% of sales compared with $770.6 million or 34.3% in the year-ago period.

Financial Position

Advance Auto Parts had cash and cash equivalents of $363.3 million as of Oct 7, 2017, up from $135.2 million as of Dec 31, 2016. Total long-term debt was $1.04 billion as of Oct 7, 2017, almost unchanged from the Dec 31, 2016 figure.

For the fiscal third quarter, operating cash flow was $401 million compared with $427 million in the year-ago period.

Store Update

As of Oct 7, 2017, Advance Auto Parts operated 5,074 stores and 129 Worldpac branches and served approximately 1,250 independently owned Carquest stores.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. While looking back an additional 30 days, we can see even more downside. There have been eight moves lower in the last two months. In the past month, the consensus estimate has shifted lower by 17.2% due to these changes.

Advance Auto Parts Inc Price and Consensus

Advance Auto Parts Inc Price and Consensus | Advance Auto Parts Inc Quote

VGM Scores

Currently, Advance Auto Parts' stock has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.