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Susquehanna Rated Monro Muffler Brake as ‘Positive’

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Price movement

Monro Muffler Brake (MNRO) has a market cap of $1.8 billion. It rose by 0.62% to close at $57.15 per share on August 26, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 0.90%, -8.3%, and -13.0%, respectively, on the same day.MNRO is trading 2.3% below its 20-day moving average, 7.8% below its 50-day moving average, and 13.1% below its 200-day moving average.

MNRO is trading 2.3% below its 20-day moving average, 7.8% below its 50-day moving average, and 13.1% below its 200-day moving average.

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Related ETFs and peers

The Vanguard Small-Cap ETF (VB) invests 0.07% of its holdings in MNRO. The ETF tracks the CRSP US Small Cap Index. The market-cap-weighted index includes the bottom 2%-15% of the investable universe. The YTD price movement of VB was 10.9% on August 26.

The iShares Russell 2000 Growth ETF (IWO) invests 0.26% of its holdings in MNRO. The ETF tracks a market-cap-weighted index of US small-cap growth stocks. The index selects from stocks ranked 1,001–3,000 by market cap based on two growth factors.

The market caps of MNRO’s competitors are as follows:

  • Genuine Parts (GPC): $15.5 billion
  • Advance Auto Parts (AAP): $11.8 billion
  • LKQ Corporation (LKQ): $11.0 billion

MNRO’s rating and performance in fiscal 1Q17

Susquehanna has initiated the coverage of Monro Muffler Brake with “positive” rating and also set the stock price target at $66.0 per share.

Monro Muffler Brake reported fiscal 1Q17 sales of $236.9 million, which is a rise of 0.17% over its sales of $236.5 million in fiscal 1Q16. The company’s gross profit margin and operating income fell by 1.8% and 6.8%, respectively, between fiscals 1Q16 and 1Q17.

Its net income and EPS (earnings per share) fell to $16.8 million and $0.50, respectively, in fiscal 1Q17, as compared to $18.8 million and $0.57 in fiscal 1Q16.

MNRO’s cash fell by 40.8%, and its inventories rose by 4.8% between fiscal 4Q16 and fiscal 1Q17. It had a current ratio and a debt-to-equity ratio of 1.1x and 0.92x, respectively, in fiscal 1Q17, compared with 1.0x and 0.86x in fiscal 4Q16.

During fiscal 1Q17, it acquired 20 McGee Auto Service and Tires retail and commercial stores in Florida to expand its market share. It expects the acquisitions to contribute ~$90 million in sales in fiscal 2017.

Projection

The company has made the following projections for fiscal 2017:

  • sales in the range of $1 billion–$1.03 billion based on current visibility, business and economic trends, and completed acquisitions (including comparable store sales in the range of 0% to -2%)
  • EPS in the range of $2.05–$2.20, which includes $0.14 to $0.16 from recent acquisitions

The company has made the following projections for fiscal 2Q17:

  • sales in the range of $245 million–$255 million
  • EPS in the range of $0.53–$0.58

Now we’ll look at LKQ Corporation (LKQ).

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