Provide chain issues and chip shortages proceed to influence car manufacturing. Additionally, excessive inflation is hurting shopper spending. In such a state of affairs, the demand for auto aftermarket components suppliers like Advance Auto Components (NYSE: AAP) might be robust as individuals want to preserve or restore their current automobiles reasonably than purchase a brand new one.
Nevertheless, the not too long ago introduced Q1’22 earnings of business peer O’Reilly Automotive (ORLY) mirrored that the auto components retailers are themselves not proof against excessive inflation and provide chain disruptions.
AAP is scheduled to announce its Q1’22 outcomes after the market closes on Could 23 and host an earnings name on Could 24.
The corporate ended 2021 on a excessive word by posting better-than-expected This fall’21 outcomes again in February. This fall gross sales elevated 1.3% to $2.4 billion with comparable retailer gross sales development of 8.2%. The corporate skilled sturdy restoration in its skilled channel and better demand in its DIY or “do-it-yourself” enterprise. Excluding the extra week within the prior-year quarter, This fall’21 adjusted EPS grew 35.4% to $2.07.
AAP shares are down 18.5% year-to-date amid broader market sell-off.
Analysts anticipate AAP’s gross sales to develop 1.5% year-over-year to $3.38 billion in Q1’22 and adjusted EPS to rise about 7% to $3.58.
Although the corporate didn’t present any particular outlook for Q1, CFO Jeff Shepherd acknowledged on the This fall’21 earnings name that he was “inspired that by the primary 4 weeks of 2022, our comp gross sales are working above the top-end of our full 12 months steerage.”
AAP expects full-year 2022 gross sales within the vary of $11.2 billion – $11.5 billion, up from $11 billion in 2021, and comparable retailer gross sales development of 1% – 3%. The corporate predicts 2022 adjusted EPS of $13.20 – $13.75, in comparison with $12.02 in 2021.
Wall Road’s Take
Forward of AAP’s Q1 outcomes, Wells Fargo analyst Zachary Fadem retained his FY22 EPS estimate however lowered FY23 EPS estimate to $15.55 from $16.02. He additionally lower AAP inventory value goal to $230 from $245.
Fadem famous that the corporate’s DIFM [do-it-for-me] read-throughs appear “encouraging” and he noticed increased sequential pricing in comparison with friends in Q1.
Nevertheless, Fadem believes that AAP is “a margin story, and AAP’s capability to reiterate +40-60bps of FY22 EBIT margin growth will probably be a key needle-mover, significantly with inflationary pressures unlikely to abate.”
The highest-rated analyst acknowledged that his Maintain score for AAP mirrored a excessive bar for FY22 margins, possible income underperformance in comparison with friends AutoZone (AZO), and O’Reilly Automotive, and “traditionally choppier execution.”
On TipRanks, AAP scores a Reasonable Purchase consensus score primarily based on three Buys and three Holds. The common Advance Auto value goal of $250.33 implies 28.05% upside potential from ranges seen earlier than market open on Thursday.
Advance Auto faces robust comparability to final 12 months’s spectacular development charges. Analysts’ estimates replicate that the corporate will proceed to develop, although at average charges. Buyers’ focus will probably be on the corporate’s Q2’22 replace and any potential adjustments to a full-year outlook amid macro challenges, and provide chain pressures.
It’s value noting that Advance Auto scores a “Excellent 10” on TipRanks’ Good Rating system, indicating that it’s extra more likely to outperform the market.
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