Automotive parts provider, Advance Auto Parts (NYSE:AAP) slid in pre-market trading after the company swung to a loss in the third quarter of $0.82 per share, as compared to earnings of $1.92 per share in the same period last year. Analysts were expecting the company to report earnings of $1.44 per share.
The company’s net sales totaled $2.7 billion in Q3, up by 2.9% year-over-year while comparable store sales increased to 1.2%. The net sales number was above analysts’ expectations of $2.68 billion.
After undertaking a strategic review, AAP has decided to sell off its automotive wholesale distributor business, Worldpac, and its Candian business, which serves predominantly commercial customers.
Shane O’Kelly, Advance Auto Parts’ President and CEO commented, “We are taking decisive actions to position Advance for long-term success and create meaningful value for our shareholders. First, we are launching a new cost reduction program that we expect will generate at least $150 million in savings on an annualized basis.”
Advance Auto Parts lowered its FY23 outlook and now expects revenues in the range of $11.25 billion to $11.3 billion as compared to its prior forecast of between $11.25 billion and $11.35 billion. The company’s management cited the impact of one-time expenses in the third quarter as well as continued pressure from higher product costs in Q4 as reasons for the reduced outlook.
For FY23, the company more than halved its prior estimate of diluted earnings of between $4.50 and $5.10 per share to the range of $1.40 to $1.80 per share.
AAP also announced the appointment of Ryan Grimsland as EVP and CFO, effective from November 27, while Tony Iskander, who has served as interim CFO since August of this year, will continue in his role as SVP, finance, and treasurer.
Is AAP Stock a Buy?
Analysts remain sidelined about AAP stock with a Hold consensus rating based on a unanimous 15 Holds. Even as AAP stock has slid by more than 60% year-to-date, the average AAP price target of $67.31 implies an upside potential of 15.3% at current levels.
