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Advance Auto Parts Beats Estimates for the Fifth Quarter in a Row

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Advance Auto Parts’ third-quarter earnings

Advance Auto Parts (AAP), the second-largest auto part retailer by 2017 sales, released its third-quarter earnings results earlier today.

The company’s adjusted EPS rose ~32.2% YoY (year-over-year) to $1.89, beating analysts’ estimate of $1.75. This was the fifth consecutive quarter during which AAP continued to beat analysts’ earnings estimates.

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Other key highlights

In the third quarter that ended on October 6, AAP’s revenue rose 4.3% YoY to $2.3 billion, while its operating profit surged 12.5% YoY. The company’s same-store sales improved 4.6% during the quarter—far better than their increase of 2.8% in the second quarter.

In the second quarter, Advance Auto Parts’ sales trend improved, and the company expects this performance to continue for the remainder of 2018. Its sales product mix and strong inventory management also helped it to improve its profit margins in the third quarter. AAP managed to report impressive improvement in its adjusted operating margin to 8.5% in the third quarter from 7.9% a year ago. Note that after its solid quarterly performance in the third quarter, the company raised its 2018 guidance.

The stock rallied

On October 25, AAP’s direct peer (XLY) O’Reilly Automotive (ORLY) released its third-quarter earnings results. ORLY’s third-quarter adjusted earnings rose 39.8% YoY. Advance Auto Parts’ solid third quarter results and its positive 2018 outlook could boost investors’ confidence. In addition, AAP’s robust third-quarter performance could raise investors’ hope for other auto parts retailers such as AutoZone (AZO) and O’Reilly Automotive.

At 11:45 AM EST today, AAP, AZO, and ORLY were up 8.6%, 1.7%, and 1.6%, respectively. Meanwhile, US automakers General Motors (GM) and Ford Motor Company (F) were trading with rises of 2.2% and 1.6%, respectively.

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