Advance Auto Parts Posts Q2 Earnings Beat, Raises Guidance

Advance Auto Parts, Inc. (AAP) reported a better-than-expected Q2 profit driven by a strong recovery in its professional business.

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Shares of the American automotive aftermarket parts provider have gained 33% over the past year. (See Advance Auto Parts stock charts on TipRanks)

Adjusted earnings of $3.40 per share improved 15.3% year-over-year and beat analysts’ expectations of $2.93 per share. The company reported earnings of $2.95 per share in the prior-year period.

Additionally, net sales grew 5.9% year-over-year to $2.6 billion. The year-over-year increase was aided by a rebound in miles driven, leading to higher demand. Results almost met the consensus estimate.

Furthermore, comparable-store sales grew 5.8% in the quarter, while same-store sales were up 13.3% on a 2-year stack basis.

Markedly, the adjusted gross profit margin improved 239 bps to 46.4%. The improvement resulted from margin expansion initiatives, including strategic pricing, brand expansion, and favorable inventory-related costs.

Looking forward to the second half of 2021, CEO Tom Greco commented, “We’re confident our ongoing focus to serve our customers with care and speed will enable us to successfully execute against our long-term strategy. This includes growth at or above the industry, capitalizing on our unique margin expansion opportunity and the return of excess cash to shareholders.”

Based on strong results during the first half of the year, the company raised its guidance for FY2021. The company now forecasts net sales in the range of $10.6 to $10.8 billion, while the consensus estimate is pegged at $10.66 billion. The company previously expected annual sales of $10.4 – 10.6 billion.

On top of this, comparable store sales are forecast to increase 6 – 8% versus the prior guidance range of 4 – 6%.

Following the strong Q2 results, J.P. Morgan analyst Christopher Horvers increased the price target from $227 to $237 (14.1% upside potential) and reiterated a Buy rating on the stock.

Consensus among analysts is a Strong Buy based on 9 Buys and 2 Holds. The average Advance Auto Parts price target of $231.80 implies 11.6% upside potential to current levels.

AAP scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.