Timing compelling, Upgrade to Overweight
Following our conference call with the AAP CEO and having seen Q1 performance at ORLY/GPC, we believe timing is compelling and expect an inflection in comp and margin trends at AAP when the company reports earnings towards the end of May. Industry fundamentals are improving, while AAP's Northeast exposure should see a disproportionate benefit from the recent favourable weather. AAP remains committed to a mid-teens operating margin longer-term and we see ~415bps of expansion over the next four years, driving 25%+ of annual EPS growth. We upgrade to Overweight with a $140 PT.Advance Auto Parts is an automotive aftermarket parts provider in North America, serving both professional installers (Professional), and do-it-yourself (DIY), customers as well as independently owned operators. The company's stores and branches provide a range selection of brand name, original equipment manufacturer and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. Through its integrated operating approach, the company serves its Professional and DIY customers through a variety of channels ranging from brick and mortar store locations to self-service e-commerce sites.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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