Advance Auto Parts Beats Q4 Expectations; Shares Up

Advance Auto Parts, Inc. (AAP) delivered robust results for the quarter ending January 1, 2022, and ended the fiscal year on a positive note. The results beat both earnings and sales estimates, and the company even issued upbeat guidance for FY22.

Following the news, shares jumped more than 2% during the extended trading session. Advance Auto Parts is a leading automotive aftermarket parts provider. With a market cap of $13.9 billion, its shares have gained 37.8% over the past year.

Robust Results

The company reported Q4 adjusted earnings of $2.07 per share, 15 cents higher than analyst estimates of $1.92 per share. The figure was 35.4% higher compared to the prior year’s number of $1.76 per share.

AAP’s quarterly net sales came in at $2.4 billion, registering a modest 1.3% growth compared to the year-ago period. The number beat the analyst estimates of $2.34 billion. This was aided by comparable same-store sales growth of 8.2%.

For the full year fiscal 2021, the company’s net sales leaped 8.8% to $11 billion driven by comparable store sales growth of 10.7%. Moreover, FY21 adjusted earnings jumped 43.8% to $12.02 per share compared to FY20.

The company’s FY21 operating cash flow came in at $1.1 billion, growing 14.7% annually, and free cash flow advanced 17.2% to $822.6 million.

Shareholder Rewards

In February, the company’s Board of Directors increased its existing share buyback authorization by $1 billion and even raised its quarterly cash common dividend by 50% to $1.50 per share. The dividend will be payable on April 1, to shareholders of record on March 18.

President and CEO Comments

Happy with the results, the company’s President and CEO, Tom Greco, said, “As we begin 2022, we remain focused on the disciplined execution of our strategic plan. While we are still navigating uncertain times as it relates to macroeconomic factors, including significant inflation, the investments we’ve made in differentiating our business will continue to provide competitive advantage for Advance.”

“We believe these investments, along with industry tailwinds, such as improvement in miles driven and an aging fleet will enable us to continue to drive profitable growth and total shareholder return,” Greco added.

Upbeat FY22 Guidance

Based on the current business momentum, and comparative sales growth above the top-end of the full-year guidance, the company gave an optimistic outlook for full-year fiscal 2022.

For FY22, Advance Auto Parts expects to achieve net sales in the range of $11.2 to $11.5 billion, modestly higher than the consensus estimates of $11.17 billion. FY22 comparable store sales are expected to grow between 1% to 3%.

Similarly, adjusted earnings are projected to be between $13.20 and $13.75 per share, while the consensus estimate is pegged at $13.27 per share.

Analysts’ View

Responding to AAP’s financial performance, Wells Fargo analyst Zachary Fadem lowered the price target on the stock to $245 (9.2% upside potential) from $255 and maintained a Hold rating.

Fadem said, “We believe AAP continues to take the difficult but necessary steps to turn around a business that we believe has long been mismanaged from hyper-growth (via M&A) and underinvestment. While the company has experienced COVID-driven tailwinds, we believe that considerable investment remains and that valuation upside in 2022/23 could prove limited absent top-line outperformance and significant margin improvement,”

Overall, the stock has a Moderate Buy consensus rating based on 11 Buys and 5 Holds. The average Advance Auto Parts price target of $264.88 implies 18.1% upside potential to current levels.

Stock Investors

TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Advance Auto Parts, with 22.7% of portfolios tracked by TipRanks increasing their exposure to AAP stock over the past 30 days.

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