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Category: Stock Market and Advance Auto Parts
Date: 14 November 2019 Stock Price: $158.58 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Advance Auto Parts, a provider of automotive aftermarket parts to professionals as well as do it yourself customers with over 4800 stores across North America and a few other global locations
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About Advance Auto Parts
Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both professional installer and do-it-yourself customers. As of October5, 2019, Advance operated 4,891 stores and 152 Worldpac branches in the United States, Canada, Puerto Rico and the U.S. Virgin Islands. The Company also serves 1,260 independently owned Carquest branded stores across these locations in addition to Mexico, the Bahamas, Turks and Caicos and British Virgin Islands.
Overview of Advance Auto Parts 3rd quarter 2019 earnings report
- Net sales: $2.312 billion (up from $2.274 billion for the same quarter of the previous year
- Net sales increased by 1.7% over the last 12 months
- Cost of sales: $1.300 billion (up from $1.268 billion for the same quarter of the previous year)
- Cost of sales increased by 2.5% over the last 12 months
- Net income: $123.669 million (up from $115.843 million for the same quarter of the previous year)
- Diluted earnings per share: $1.75 (up from $1.56 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 70.664 million (down from 74.190 million for the same quarter of the previous year)
- Cash and cash equivalents: $573.726 million
- Cash and cash equivalents per share: $8.11
- Cash and cash equivalents makes up 5.1% of Advance Auto Parts' market capital
- Cash and cash equivalents makes up 5.2% of Advance Auto Parts' total assets
- Accounts receivable: $721.342 million
- Accounts receivable makes up 6.5% of Advance Auto Parts' total assets
- Inventories: $4.391 billion
- Inventories makes up 39.5% of Advance Auto Parts' total assets
- Stockholders equity of Advance Auto Parts : $3.454 billion
- Stockholders equity per share: $48.9
- Advance Auto Parts is trading at 3.24 times its stockholders equity per share which is outside the expected range of between 2 and 4 that most firms tend to trade at
- Cash generated from operations (for 9 months): $708.546 million
- Cash generated from operations per share (for 9 months): $10.02
Advance Auto Parts' management commentary on their 3rd quarter 2019 earnings report
RALEIGH, N.C., November 12, 2019 - Advance Auto Parts, Inc. (NYSE: AAP), a leading automotive aftermarket parts provider in North America, that serves both professional installer and do-it-yourself customers, today announced its financial results for the third quarter ended October 5, 2019.
"The Advance team, including our network of Independent Partners, delivered our sixth consecutive quarter of net sales growth in the third quarter as a result of our unrelenting focus on the Customer. We also expanded margins and remained highly disciplined in our approach to cost reduction," said Tom Greco, President and Chief Executive Officer. "In addition to our performance improvements and margin expansion, we continue to invest in critical information technology and supply chain initiatives that are expected to unlock significant productivity over the next several years. Notably, our working capital improvements were driven by our focus on cash management across the board. I am confident in our teams’ ability to drive additional sales and margin progress. We are on track to deliver record free cash flow, resulting in a substantial year over year increase in 2019 versus the prior year. Consistent with our commitment to drive significant value growth for our shareholders, I am also pleased to announce an additional $700.0 million share repurchase authorization."
"The Advance team, including our network of Independent Partners, delivered our sixth consecutive quarter of net sales growth in the third quarter as a result of our unrelenting focus on the Customer. We also expanded margins and remained highly disciplined in our approach to cost reduction," said Tom Greco, President and Chief Executive Officer. "In addition to our performance improvements and margin expansion, we continue to invest in critical information technology and supply chain initiatives that are expected to unlock significant productivity over the next several years. Notably, our working capital improvements were driven by our focus on cash management across the board. I am confident in our teams’ ability to drive additional sales and margin progress. We are on track to deliver record free cash flow, resulting in a substantial year over year increase in 2019 versus the prior year. Consistent with our commitment to drive significant value growth for our shareholders, I am also pleased to announce an additional $700.0 million share repurchase authorization."
Capital Allocation
During the third quarter, the Company repurchased 1.0 million shares of its common stock at an aggregate amount of $140.0 million under the August 8, 2018 share repurchase program for an average price of $141.54. On August 7, 2019 the Company's Board of Directors authorized a new $400.0 million share repurchase program that replaced the previous $600.0 million share repurchase program. Under this new share repurchase program the Company repurchased 1.4 million shares of its common stock at an aggregate amount of $198.6 million for an average price of $136.77 per share. At the end of the third quarter of 2019, the Company had $201.4 million remaining under the share repurchase program. On November 8, 2019, the Company's Board of Directors authorized $700.0 million as an addition to the existing share repurchase program.
On November 8, 2019, the Company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on January 3, 2020 to all common shareholders of record as of December 20, 2019.
During the third quarter, the Company repurchased 1.0 million shares of its common stock at an aggregate amount of $140.0 million under the August 8, 2018 share repurchase program for an average price of $141.54. On August 7, 2019 the Company's Board of Directors authorized a new $400.0 million share repurchase program that replaced the previous $600.0 million share repurchase program. Under this new share repurchase program the Company repurchased 1.4 million shares of its common stock at an aggregate amount of $198.6 million for an average price of $136.77 per share. At the end of the third quarter of 2019, the Company had $201.4 million remaining under the share repurchase program. On November 8, 2019, the Company's Board of Directors authorized $700.0 million as an addition to the existing share repurchase program.
On November 8, 2019, the Company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on January 3, 2020 to all common shareholders of record as of December 20, 2019.
Advance Auto Parts (NYSE: AAP) stock price history
The image below shows the stock price history of Advance Auto Parts (NYSE: AAP) over the last 5 years. And it's been a pretty mediocre time for Advance Auto Parts stockholders. 5 years ago the stock was trading at around $144.80 and it is currently trading at $158.58 a stock. That is a relative flat return of 9.5% provided to Advance Auto Parts over the last 5 years.
The stock of Advance Auto Parts is trading at close to the midpoint between its 52 week low and its 52 week high, which to us is an indication that the short term sentiment and momentum of Advance Auto Parts is neutral at this point in time.
The stock of Advance Auto Parts is trading at close to the midpoint between its 52 week low and its 52 week high, which to us is an indication that the short term sentiment and momentum of Advance Auto Parts is neutral at this point in time.
Recent coverage of Advance Auto Parts
The extract below discusses the latest learning management system of Advance Auto Parts as obtained from TheStreet.com
Advance Auto Parts, Inc. (NYSE: AAP), a leading automotive aftermarket parts provider, has launched a new learning management system designed to provide training programs that grow an automotive professional's knowledge and skills throughout their entire career. Advance regularly serves more than 26,000 individuals in North America each year with training courses offered through the company's Carquest Technical Institute (CTI) and Worldpac Training Institute (WTI) programs. Training from Advance now combines courses available online and in the classroom from CTI+WTI into an integrated training solution, giving aftermarket professionals access to a robust library of technical training and business management education. Career Pathways, which feature a structured set of online and classroom events to establish mastery of technical and business competencies, are currently targeted to the General Service Technician and Professional Technician, with Senior Technician, Master Technician, and a number of specialist programs coming by the end of the year. "Delivering quality training is critical to addressing the technician shortage facing the automotive industry," said Chris Chesney, Senior Director of Customer Training at Advance. "Integrating the expertise and curriculum of CTI+WTI into a centralized, easy-to-use platform enables Advance to go to market with an unrivaled training program. No matter what stage a person is in the life of their career, training is crucial to their long-term success."
Advance Auto Parts, Inc. (NYSE: AAP), a leading automotive aftermarket parts provider, has launched a new learning management system designed to provide training programs that grow an automotive professional's knowledge and skills throughout their entire career. Advance regularly serves more than 26,000 individuals in North America each year with training courses offered through the company's Carquest Technical Institute (CTI) and Worldpac Training Institute (WTI) programs. Training from Advance now combines courses available online and in the classroom from CTI+WTI into an integrated training solution, giving aftermarket professionals access to a robust library of technical training and business management education. Career Pathways, which feature a structured set of online and classroom events to establish mastery of technical and business competencies, are currently targeted to the General Service Technician and Professional Technician, with Senior Technician, Master Technician, and a number of specialist programs coming by the end of the year. "Delivering quality training is critical to addressing the technician shortage facing the automotive industry," said Chris Chesney, Senior Director of Customer Training at Advance. "Integrating the expertise and curriculum of CTI+WTI into a centralized, easy-to-use platform enables Advance to go to market with an unrivaled training program. No matter what stage a person is in the life of their career, training is crucial to their long-term success."
Advance Auto Parts (NYSE: AAP) latest stock valuation
So what is Advance Auto Parts (NYSE:AAP) stock worth based on the release of their latest earnings report? Based on the earnings reported our valuation model provides a target (full value) price for Advance Auto Parts at $126.90 a stock. We therefore believe that the stock is overvalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $126.90 A good entry point into Advance Auto Parts' would therefore be at $114.20or below. We expect the stock of Advance Auto Parts to pull back in coming weeks and months to levels closer to our target price.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $126.90 A good entry point into Advance Auto Parts' would therefore be at $114.20or below. We expect the stock of Advance Auto Parts to pull back in coming weeks and months to levels closer to our target price.
Next earnings release of Advance Auto Parts
It is expected that Advance Auto Parts will release their 4th quarter and full fiscal 2019 earnings report in mid February 2020