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Citi No Longer Bearish On Advance Auto Parts

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Citi No Longer Bearish On Advance Auto Parts
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The bearish case for Advance Auto Parts, Inc. (NYSE: AAP) has come to an end after the company's second-quarter results came in better than expected, according to Citi.

The Analyst

Citi's Kate McShane upgraded Advance Auto Parts from Sell to Neutral.

The Thesis

Advance Auto Parts' earnings report puts an end to Citi's bearish stance as it marks the company's first positive comp since the 2016 and marks the second consecutive quarter of operating margin expansion after two years of declines. McShane said in the note, however, that there's "still work to be done" for the company to narrow the performance gap against its peers.

It's difficult to quantify how much of the company's momentum is attributed to company specific initiatives or to favorable industry wide trends, such as a return to normalized weather, the analyst said. As such, a bullish case for the stock can't be made at this time, especially with Advance Auto Parts' stock trading at a premium versus the industry leader O'Reilly Automotive Inc (NASDAQ: ORLY) at 20 times two-year out EPS versus 18 times.

Price Action

Shares of Advance Auto Parts were trading higher by 1.5 percent to $158.48 Wednesday afternoon. Shares were trading around the $144 area before Tuesday's earnings release.

Related Links:

Credit Suisse Constructive On Advance Auto Parts After Q4 Beat

The Auto Parts Trade: AutoZone Vs. Advance Vs. O'Reilly

Photo credit: WhisperToMe, via Wikimedia Commons

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Nov 2018Deutsche BankMaintainsBuyBuy
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Posted-In: Auto Parts cars Citi Kate McShaneAnalyst Color Upgrades Analyst Ratings Best of Benzinga

 

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