Advance Auto Parts (AAP) To Post Q2 Earnings: What's Up?

Advance Auto Parts, Inc. (NYSE:AAP) is set to report second-quarter 2019 results on Aug 13, before the opening bell. In the last reported quarter, the company delivered a positive earnings surprise of 4.24%. In fact, the company surpassed estimates in all of the trailing four quarters, at an average of 5.04%.

In the past three months, shares of the automotive company have underperformed the industry it belongs to. The stock has declined 9.9% against the industry’s 3.6% growth.

Let’s discuss the factors that are likely to make an impact on the upcoming quarterly announcement.

Factors to Influence Q2

To reduce turnover in each of the four core frontline roles, Advance Auto has been slashing the administrative work hours to dedicate more time to team member training and customer facing sales. This is likely to improve productivity in the company’s stores and customer support centers in the quarter under review.

The company has also been focusing on store openings as well as increasing online presence and strategic collaborations. Further, benefits from higher online traffic enables Auto Parts to offer an extensive portfolio of aftermarket auto parts, accessories and maintenance items to a larger customer base. This is likely to expand its footprint and make a positive impact in the soon-to-be released quarterly results.

However, the company’s huge capital spending plans for store openings, partnerships and investments to strengthen supply chain are likely to increase expenses in second-quarter results. The company expects capital expenditure in the band of $250-$300 million for the current year.

Additionally, competition with national and regional automotive retailers along with consumers’ preference for new vehicle purchases can affect demand for Advance Auto Parts’ products in the quarter to be reported.

What the Zacks Model Says

Our proven model does not conclusively show that the company is likely to beat earnings estimates in the quarter to be reported. This is because a stock needs to have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is not the case here as you will see below:

Earnings ESP: The company has an Earnings ESP of -4.63%. The Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $2.12 and $2.22, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell), which along with a negative Earnings ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are some companies that you may want to consider as our model shows that they have the right combination of elements to post a beat this time around.

IAA Inc Common Stock (NYSE:IAA) has an Earnings ESP of +0.28% and carries a Zacks Rank #3. It is slated to release second-quarter fiscal 2019 results on Aug 13. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Evolus, Inc (NASDAQ:EOLS) has an Earnings ESP of +27.75% and currently carries a Zacks Rank of 3. It is slated to release second-quarter 2019 results on Aug 12.

Abercrombie & Fitch Company (NYSE:ANF) has an Earnings ESP of +1.50% and currently carries a Zacks Rank of 3. It is slated to release second-quarter 2019 results on Aug 29.

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