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Do Analysts Expect AAP’s Earnings to Improve after Weak 2Q17?

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Aug. 17 2017, Updated 6:36 a.m. ET

Advance Auto Parts’ 2Q17 results

Advance Auto Parts’ (AAP) 2Q17 results have fueled investors’ worries about possible near-term weakness in the auto parts retail industry, which could be the primary reason why AAP stock slipped more than 20% on the day of its 2Q results announcement. According to the company’s management, this weakness is temporary, and the company’s long-term growth is likely to remain unaffected by this weakness. Let’s find out what Wall Street analysts think about Advance Auto Parts’ growth in the upcoming quarters.

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2017 earnings estimates

According to analysts’ estimates, the negative trend in Advance Auto Parts’ earnings will continue in 3Q17. Analysts expect its 3Q17 earnings to fall 5.8% to $1.63 per share from $1.73 in 3Q16. On the brighter side, estimates for the company’s 4Q17 earnings reflect positive growth of about 6.0% to $1.06 from $1.00 in 4Q16.

These estimates indicate a temporary near-term weakness in AAP’s earnings and strong recovery in the long term.

Will sales improve?

Analysts estimate AAPs’s sales to remain stagnated in the second half of 2017. According to these estimates, the company’s 3Q17 revenues will be at $2.6 billion, up 0.5% YoY (year-over-year), while its 4Q17 revenues will be at $2.1 billion with about a 0.3% drop.

In the first half of 2017, US auto sales fell, which negatively affected revenues of mainstream auto giants (XLY) including General Motors (GM), Ford (F), and Fiat Chrysler (FCAU) in 1H17.

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