Advance Auto Parts (NYSE:AAP) Reports Q2 In Line With Expectations But Stock Drops
Auto parts and accessories retailer Advance Auto Parts (NYSE:AAP) reported results in line with analysts’ expectations in Q2 CY2024, with revenue flat year on year at $2.68 billion. On the other hand, the company’s full-year revenue guidance of $11.2 billion at the midpoint came in slightly below analysts’ estimates. It made a GAAP profit of $0.75 per share, down from its profit of $1.32 per share in the same quarter last year.
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Advance Auto Parts (AAP) Q2 CY2024 Highlights:
- Revenue: $2.68 billion vs analyst estimates of $2.67 billion (small beat)
- EPS: $0.75 vs analyst expectations of $0.91 (17.2% miss)
- The company dropped its revenue guidance for the full year to $11.2 billion at the midpoint from $11.4 billion, a 1.8% decrease
- EPS (GAAP) guidance for the full year is $2.25 at the midpoint, missing analyst estimates by 35%
- Gross Margin (GAAP): 41.5%, down from 42.6% in the same quarter last year
- EBITDA Margin: 4.8%, down from 7.5% in the same quarter last year
- Free Cash Flow Margin: 1.6%, down from 6.1% in the same quarter last year
- Locations: 5,097 at quarter end, down from 5,109 in the same quarter last year
- Same-Store Sales were flat year on year (-0.6% in the same quarter last year)
- Market Capitalization: $3.69 billion
“Our team delivered positive comparable sales growth while navigating a challenging demand environment during the second quarter. I would like to thank the team for their hard work and dedication to serving our customers,” said Shane O’Kelly, president and chief executive officer.
Founded in Virginia in 1932, Advance Auto Parts (NYSE:AAP) is an auto parts and accessories retailer that sells everything from carburetors to motor oil to car floor mats.
Auto Parts Retailer
Cars are complex machines that need maintenance and occasional repairs, and auto parts retailers cater to the professional mechanic as well as the do-it-yourself (DIY) fixer. Work on cars may entail replacing fluids, parts, or accessories, and these stores have the parts and accessories or these jobs. While e-commerce competition presents a risk, these stores have a leg up due to the combination of broad and deep selection as well as expertise provided by sales associates. Another change on the horizon could be the increasing penetration of electric vehicles.
Sales Growth
Advance Auto Parts is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.
As you can see below, the company’s annualized revenue growth rate of 3.1% over the last five years was sluggish as its store footprint remained relatively unchanged, implying that growth was driven by more sales at existing, established stores.
This quarter, Advance Auto Parts reported a rather uninspiring 0.1% year-on-year revenue decline to $2.68 billion in revenue, in line with Wall Street’s estimates. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
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Same-Store Sales
Advance Auto Parts’s demand within its existing stores has barely increased over the last eight quarters. On average, the company’s same-store sales growth has been flat.
In the latest quarter, Advance Auto Parts’s year on year same-store sales were flat. This performance was more or less in line with the same quarter last year.
Key Takeaways from Advance Auto Parts’s Q2 Results
It was encouraging to see Advance Auto Parts narrowly top analysts’ revenue and EPS expectations this quarter. On the other hand, its full-year revenue guidance was lowered, which is never a good sign. Adding to the pain was that the company's full-year earnings forecast missed analysts’ expectations. Overall, this quarter was mediocre. The stock traded down 10% to $55.75 immediately after reporting.
Advance Auto Parts may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
