Could Weakness Continue in AAP’s Upcoming Earnings?

Jitendra Parashar - Author

Nov. 20 2017, Updated 7:33 a.m. ET

Advance Auto Parts’ fiscal 3Q17 earnings

After Advance Auto Parts’ (AAP) weak fiscal 3Q17 results, investors’ concerns about a possible near-term weakness in the auto parts retail industry could continue. This could be the primary reason why AAP stock fell ~4.3% on November 15 after rising 16.3% on the day of its fiscal 3Q17 earnings release.

The company’s management considers this weakness as temporary, and its long-term growth is likely to remain unaffected by this softness. Now, let’s find out what Wall Street analysts think about Advance Auto Parts’ growth in the upcoming quarters.

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Fiscal 4Q17 earnings estimates

According to analysts’ consensus estimates, a negative trend in Advance Auto Parts’ earnings could continue in fiscal 4Q17. Analysts expect AAP’s fiscal 4Q17 adjusted earnings to reach $0.64 per share, about 36% lower than $1.00 in fiscal 4Q16.

On the brighter side, estimates for the company’s fiscal 1Q18 earnings reflect positive growth of about 14.0% to $1.83 compared to $1.60 in fiscal 1Q17. Overall, these estimates indicate a temporary near-term weakness in AAP’s earnings and strong recovery in the long term.

Sales estimates

Analysts expect Advance Auto Parts’ sales to remain weak in fiscal 4Q17. According to these estimates, the company’s fiscal 4Q17 revenues should be ~$2.0 billion, down ~3.0% YoY (year-over-year) while its fiscal 1Q18 revenues should be ~$3.0 billion with an ~2.4% YoY increase.

In the first ten months of 2017, US auto sales have declined due to weakness in small car sales. These lower US auto sales have negatively affected revenues of mainstream auto companies (IYK) such as General Motors (GM), Ford (F), and Fiat Chrysler (FCAU) in 2017 so far.

Continue to the next part to find out how Advance Auto Parts’ valuation multiples look after its fiscal 3Q17 results.


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