Advance Auto Parts, Inc. (AAP) just hit a new multi-year high after reporting strong Q2 results in mid August that included a 14% earnings surprise. Estimates are on the rise and the valuation picture is in check, providing some solid upward momentum for this Zacks #1 rank stock.
Advance Auto Parts, through its subsidiaries, operates as a retailer of automotive aftermarket parts and accessories. The company owns or operates about 3,500 stores nation wide and has a market cap of $4.59 billion.
Although the economy has been weak over the last few years, Americans still love owning and working on their cars. This dynamic propelled Advance to better than expected Q2 results on August 12 that included a solid 14% earnings surprise.
Revenue for the period was up 7.2% from last year to $1.42 billion. Earnings also came in strong at $1.16, 14% ahead of the Zacks Consensus Estimate, lifting the company’s average earnings surprise over the last four quarters to 5.5%.
Not only did Advance see some pretty solid top-line growth in a tough consumer environment, its attention to expenses enabled it to expand its gross margin to 50.4% from 49.3% last year. Advance’s SG&A (sales/general/administrative) costs also improved, falling to 38.3% from 39.1%.
Share Repurchase Program
Advance also continues to pursue its share repurchase program, buying back 3.4 million common shares over the quarter for $167.8 million. The company also announced that the Board has approved an additional $300 million buy back program to replace the existing $500 million program that had $44.5 million remaining.
The company used the good quarter to further insulate its balance sheet, with cash and equivalents up $34 million against total debt of $302 million.
Estimates took a nice jump forward on the quarter, with the current year adding 20 cents to $3.78 and the next year gaining 23 cents to $4.26, a 13% growth projection.
But in spite of the recent gains, AAP still has value, trading with a forward P/E of 14X against its peer average of 16X.
AAP jumped higher on the good quarter, hitting a new multi-year high at $55.78. Look for support from the trend line on any weakness, take a look below.