What We Learned From Auto Parts Retailer Earnings

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Auto parts retailers are moving in opposite directions on Tuesday following earnings reports from Advance Auto Parts and AutoZone,
Still, there was good news in the results of both companies.

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Late Monday, Advance Auto (ticker: AAP) said it earned $3.57 per share on revenue, up more than 2% from the same period last year, to $3.4 billion.

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Analysts were looking for EPS of $3.59 on revenue of $3.39 billion. For the full year, the company expects EPS of $13.30 to $13.85 on revenue of $11.2 billion to $11.5 billion. The consensus calls for EPS of $13.68 and revenue of $11.4 billion.

Tuesday morning saw AutoZone (AZO) report earnings of $29.03 per share on revenue, jumping nearly 6% to $3.87 billion. Analysts were looking for EPS of $26.07 on revenue of $3.71 billion.

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Advance Auto shares fell nearly 1.2% to $181.17 at noon, while AutoZone shares were up 3.5% to $1,868.89. The S&P 500 was down 1.7% and the Dow Jones Industrial Average was down 0.9%.

It’s not surprising that Advance Auto is falling; Not only were its bottom-line results shy of the two penny consensus, but its outlook is a bit mild. In contrast, AutoZone delivered a strong quarter, and it allayed some fears about the strength of its DIY business, where it has a higher exposure than some peers.

Nonetheless, both companies saw same-store sales growth, 0.6% for Advance Auto and 2.6% for AutoZone. That’s relatively good news, given that investors are concerned that higher gas prices and more hybrid work schedules will weigh on recently driven miles, reducing demand for repairs.

Still, investors were hoping for further proof that Advance Auto’s turnaround plan is paying off; While the quarter wasn’t particularly bad, it didn’t quite match that bar for many.

Digging a little deeper reveals some upbeat metrics, including expanded gross margins and a re-acceleration of same-store sales trends in recent weeks.

Wedbush analyst Seth Basham, while keeping his outperform rating on the stock, lowered his full-year estimates for Advance Auto, writing that “the broader industry could grow faster than the historical average as low- to middle-income consumers trade and their Maintain existing vehicles. If a weak macro environment arises.”

It’s also part of the thesis on AutoZone, which had a strong quarter overall. On the company’s conference call, it also noted that comp had intensified again in recent weeks.

“Despite what we suspected, there were notable headwinds from inclement weather (cold/wet conditions and a late start to spring), especially given the huge exposure to the company’s DIY businesses, and a difficult incentive-fueled comparison, The company delivered an impressively positive comp. Writes Truist analyst Scott Ciccarelli, who has a buy rating and a $2,215 price target on the stock.

Write Teresa Rivas at [email protected]

Credit: www.marketwatch.com /

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