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UPDATE: Credit Suisse Reiterates On Advance Auto Parts As Merger Moves Forward

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In a report published Friday, Credit Suisse analyst Gary Balter reiterated an Outperform rating on Advance Auto Parts (NYSE: AAP), and raised the price target from $150.00 to $160.00.

In the report, Credit Suisse noted, “Merger economics are not for the faint of heart and we expect that we will see some bumps in the road from AAP as they put together GPII and AAP.

"Yesterday, we had a relatively smooth ride, with the steps just recently outlined at the analyst meeting moving forward, and no major hiccups to point to. We expect smooth near-term sailing as well, as costs are being reduced, headquarters are being consolidated, and some of the initial parts of the integration are occurring. Given the still relatively low valuation for AAP, that keeps this stock as our favorite in retailing. However, we recognize that the market is a fickle space and we would not be surprised by some less than ideal reports a few quarters out, when perhaps the weather is less cooperative or DIFM takes a bigger chunk out of gross margin.

"At this stage, we call those opportunities, because if management stays focused on serving the customer, as they seem to be, we expect the longer term will be quite rewarding. We are raising our target price to $160 (from $150), reflecting 18.5x our updated FY 15 EPS estimate and increasing our 2014, 2015, and 2016 EPS estimates to $7.50, $8.68, and $9.89, respectively.”

Advance Auto Parts closed on Thursday at $131.59.

Latest Ratings for AAP

DateFirmActionFromTo
Nov 2014Morgan StanleyMaintainsOverweight
Nov 2014Sterne AgeeInitiates Coverage onBuy
Nov 2014CitigroupMaintainsNeutral

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