Report
Sam Hudson, CFA

Q417 beat, but FY18 guidance light

AAP reported a Q4 beat, including a -2.6% comp (consensus -3.8%) and EPS $0.12 ahead. Encouragingly, SG&A expenses improved 24bps YoY, the first improvement since Q316. However, FY18 guidance was slightly underwhelming with AAP guiding to a -2.0% to flat comp (consensus +1.1%) and ~25bps of margin expansion at the mid-point (consensus +40bps). Although we believe the auto parts retailers are guiding conservatively early in the year, it will be difficult to see meaningful margin expansion at AAP until the company returns to positive comp performance. There was no update to AAP's long-term targets, but FY18 guidance implies that it is still early in the turnaround opportunity.
Underlying
Advance Auto Parts Inc.

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.

Provider
Atlantic Equities
Atlantic Equities

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.

Analysts
Sam Hudson, CFA

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