Advance Auto Parts' Q3 Results Warm Investors Up To The Potential For A Turnaround

Advance Auto Parts, Inc. AAP reported its Q3 results with a smaller than anticipated decline in same-store sales, while also providing better-than-expected targets for 2021.

Baird’s Craig R. Kennison maintain a Neutral rating on the company, while raising the price target from $165 to $175.

Q3 Results

The stock appreciated 12.74 percent in pre-market trading on November 15.

Advance Auto Parts reported its revenue for Q3 ahead of the estimate, proving a boost to gross profit dollars, despite a 100 bps decline in gross margin.

The company reported EPS of $1.53, down from $1.63 a year ago. However, excluding certain items, EPS stood at $1.73, as compared to the consensus expectations of $1.70.

“Management continues to redeploy operating cost savings into customer service initiatives focused on regaining market share,” Kennison mentioned.

5-Year Plan

Management also provided financial targets for 2021, which significantly beat expectations.

Under the five-year plan, Advance Auto Parts expects to achieve mid-single-digit comparable store growth, with operating margin expansion of at least 500 bps.

Kennison pointed out that this implies EPS of $15–$16 on revenue of $12 billion–$13 billion.

“Investors like the ambitious goals, but note the targets lack numerical specificity and defer material improvement until after 2017,” the analyst added.

At last check, Advance Auto Parts was up 16.48 percent on the day, trading at $166.45.