Advance Auto Parts (AAP) earnings release for the 1st quarter of their 2021 fiscal year
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Category: Stock Market and Advance Auto Parts (AAP)
Date: 4 June 2021 Stock Price of Advance Auto Parts: $191.14 Market Capital of Advance Auto Parts: $12.5 billion We take a look at the 1st quarter earnings report of their 2021 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. The group reported revenues of $3.3 billion and net income of $185.9 million.
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In the first quarter of 2021, we delivered record-breaking sales growth across our business, as both DIY and professional customers turned to Advance for their automotive needs amid a strong industry backdrop," said Tom Greco, president and chief executive officer "
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.
Advance Auto Parts store
Overview of Advance Auto Parts 1st quarter 2021 earnings report
Q1 2021 Highlights
- Net sales increased 23.4% to $3.3 billion
- Comparable store sales (2) increased 24.7%; On a two-year stack, Comparable store sales increased 15.4%
- Operating income increased 221.5% to $252.1 million; Operating income margin expanded 466 basis points to 7.6%
- Adjusted operating income (2) increased 164.0% to $298.8 million; Adjusted operating income margin (2) expanded 478 basis points to 9.0%
- Diluted EPS increased 346.0% to $2.81; Adjusted Diluted EPS (2) increased 234.0% to $3.34
- Operating cash flow increased to $329.9 million from $10.9 million; Free cash flow (2) increased to $259.0 million from $(72.1) million
- Returned approximately $203.5 million to shareholders through the combination of share repurchases and the company’s quarterly cash dividend
Advance Auto Parts' management commentary on their 3rd quarter 2020 earnings report
RALEIGH, N.C.--(BUSINESS WIRE)-- 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 first quarter ended April 24, 2021.
"In the first quarter of 2021, we delivered record-breaking sales growth across our business, as both DIY and professional customers turned to Advance for their automotive needs amid a strong industry backdrop," said Tom Greco, president and chief executive officer. "I want to thank all our team members and independent partners for their relentless focus on execution during the quarter. In addition to the positive macro environment, our significant investments in both the business and our team over the past several years led to an improved customer experience and margin expansion. We delivered comparable store sales growth in the first quarter of 24.7% and adjusted operating income margin expansion of 478 basis points. Robust consumer demand, on-going cost control and operational improvements helped enable both gross margin and SG&A expense leverage, resulting in an all-time high for quarterly adjusted diluted EPS.
"Our commitment and actions to protect the financial strength of the business during the pandemic resulted in first quarter free cash flow of $259 million. In addition, we returned $204 million to our shareholders through the combination of share repurchases and our quarterly cash dividend of $0.25 per share. Based on the health of our balance sheet and the confidence in our continued cash generation, our board recently approved an additional $1 billion share repurchase authorization and a significant increase in our quarterly cash dividend. We're committed to a balanced approach in returning cash to shareholders and our recent actions are a testament to that commitment. Building on the strength of our brands and our diversified digital and physical asset base, we remain focused on the execution of the long-term strategy we discussed in April to drive total shareholder returns for years to come."
"In the first quarter of 2021, we delivered record-breaking sales growth across our business, as both DIY and professional customers turned to Advance for their automotive needs amid a strong industry backdrop," said Tom Greco, president and chief executive officer. "I want to thank all our team members and independent partners for their relentless focus on execution during the quarter. In addition to the positive macro environment, our significant investments in both the business and our team over the past several years led to an improved customer experience and margin expansion. We delivered comparable store sales growth in the first quarter of 24.7% and adjusted operating income margin expansion of 478 basis points. Robust consumer demand, on-going cost control and operational improvements helped enable both gross margin and SG&A expense leverage, resulting in an all-time high for quarterly adjusted diluted EPS.
"Our commitment and actions to protect the financial strength of the business during the pandemic resulted in first quarter free cash flow of $259 million. In addition, we returned $204 million to our shareholders through the combination of share repurchases and our quarterly cash dividend of $0.25 per share. Based on the health of our balance sheet and the confidence in our continued cash generation, our board recently approved an additional $1 billion share repurchase authorization and a significant increase in our quarterly cash dividend. We're committed to a balanced approach in returning cash to shareholders and our recent actions are a testament to that commitment. Building on the strength of our brands and our diversified digital and physical asset base, we remain focused on the execution of the long-term strategy we discussed in April to drive total shareholder returns for years to come."
Capital Allocation
On April 19, 2021, the company's Board of Directors approved an additional share repurchase authorization of $1.0 billion. During the first quarter of 2021, the company repurchased approximately 1.1 million shares of its common stock for an aggregate amount of approximately $170.4 million, or an average price of $157.84 per share. At the end of the first quarter of 2021, the company had approximately $1.3 billion remaining under the share repurchase program.
On April 19, 2021 the company's Board of Directors declared a regular cash dividend of $1.00 per share to be paid on July 2, 2021 to all common stockholders of record as of June 18, 2021.
Updated 2021 Full Year Guidance
"We continue to see top-line sales strength in the early weeks of the second quarter of 2021," said Jeff Shepherd, executive vice president and chief financial officer. "Through the first four weeks of Q2, our comp sales continue to trend in the mid-teens and on a two-year stack are comparable with our Q1 2021 increase of 15.4%. While we're still anticipating significant volatility throughout the balance of this year due to macro-economic factors, we're again updating our full year guidance to reflect this continued top-line momentum."
On April 19, 2021, the company's Board of Directors approved an additional share repurchase authorization of $1.0 billion. During the first quarter of 2021, the company repurchased approximately 1.1 million shares of its common stock for an aggregate amount of approximately $170.4 million, or an average price of $157.84 per share. At the end of the first quarter of 2021, the company had approximately $1.3 billion remaining under the share repurchase program.
On April 19, 2021 the company's Board of Directors declared a regular cash dividend of $1.00 per share to be paid on July 2, 2021 to all common stockholders of record as of June 18, 2021.
Updated 2021 Full Year Guidance
"We continue to see top-line sales strength in the early weeks of the second quarter of 2021," said Jeff Shepherd, executive vice president and chief financial officer. "Through the first four weeks of Q2, our comp sales continue to trend in the mid-teens and on a two-year stack are comparable with our Q1 2021 increase of 15.4%. While we're still anticipating significant volatility throughout the balance of this year due to macro-economic factors, we're again updating our full year guidance to reflect this continued top-line momentum."
Advance Auto Parts (AAP) stock price chart over the last 5 years
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. Over the last 5 years its a return of 18.7%% provided to Advance Auto Parts.
The stock of Advance Auto Parts is trading at closer to its 52 week high than its 52 week low which is an indication that the short term sentiment and momentum of Advance Auto Parts is positive at this point in time.
The stock of Advance Auto Parts is trading at closer to its 52 week high than its 52 week low which is an indication that the short term sentiment and momentum of Advance Auto Parts is positive at this point in time.
Advance Auto Parts (AAP) stock price chart over the last 5 years
Advance Auto Parts (AAP) stock vs O'reilly (ORLY) stock performance over the last 5 years
The image below shows the stock price performance of Advance Auto Parts (AAP) stock vs O'reilly (ORLY) stock performance over the last 5 years. Both these firms are active in the aftermarket car parts.
O'Reilly's Auto Parts stock has easily outperformed that of Advance Auto Parts over the last 5 years
- O'Reilly Auto Parts: 93%
- Advance Auto Parts: 18.7%
O'Reilly's Auto Parts stock has easily outperformed that of Advance Auto Parts over the last 5 years
Advance Auto Parts (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 price (full value price) for Advance Auto Parts at $183.40 a stock. We therefore believe that the stock is slightly overvalued.
We usually suggest long term investors look to enter a stock at least 10% below our target price (full value price) which in this case is $183.40. A good entry point into Advance Auto Parts' would therefore be at $165.10 or below. We expect the stock of Advance Auto Parts to pull back in coming weeks and months to levels closer to our target price.
As the stock of Advance Auto Parts is trading at well above our suggested entry point into the stock we rate their stock as a sell
We usually suggest long term investors look to enter a stock at least 10% below our target price (full value price) which in this case is $183.40. A good entry point into Advance Auto Parts' would therefore be at $165.10 or below. We expect the stock of Advance Auto Parts to pull back in coming weeks and months to levels closer to our target price.
As the stock of Advance Auto Parts is trading at well above our suggested entry point into the stock we rate their stock as a sell
Advance Auto Parts store
Next earnings release of Advance Auto Parts
It is expected that Advance Auto Parts will release their 2nd quarter 2021 earnings report in early September 2021