Citi No Longer Bearish On Advance Auto Parts

The bearish case for Advance Auto Parts, Inc. 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 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

Posted In: Auto PartscarsCitiKate McShaneAnalyst ColorUpgradesAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.