Advance Auto Parts (AAP) To Post Q3 Earnings: What Awaits?

Advance Auto Parts, Inc. (NYSE:AAP) is slated to release third-quarter 2019 results on Nov 12, before the opening bell.

The leading provider of automotive parts posted weaker-than-expected results in the last reported quarter due to lower-than-anticipated revenues and flat year-over-year comparable store sales.

As far as earnings surprises are concerned, the company has surpassed the Zacks Consensus Estimate in three of the last four quarters, the average beat being 0.94%. This is depicted in the graph below:

Advance Auto Parts, Inc. Price and EPS Surprise

Which Way are Top- and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for third-quarter earnings per share (EPS) has been stable in the past 30 days at $2.07. This suggests an improvement over the year-ago quarter’s reported earnings of $1.89 per share. The Zacks Consensus Estimate for revenues is pegged at $2.30 billion, suggesting a rise from the prior-year reported figure of $2.27 billion.

Factors Setting the Tone

Advance Auto Parts expanded and optimized its footprint through new stores, widening online presence and collaborations in the third quarter of 2019. This is expected to positively reflect in the upcoming quarterly results.

In addition to driving growth across professional business, the company is likely to have addressed a few of the internal factors, which are not weather dependent, to make progress on its DIY omnichannel e-commerce platform, in third-quarter 2019. Owing to these, the firm is expected to have witnessed comparable sales growth in the third quarter.

Advance Auto Parts is expected to have reduced rent and occupancy costs across its stores through footprint optimization and continued focus on safety in the quarter to be reported. Further, the company is likely to have laser-focused on drive retail traffic. These initiatives are anticipated to have helped the company enhance its margins in the quarter margin.

However, the company’s huge capex for store openings, partnerships and investments to strengthen supply chain are likely to have bumped up expenses in the quarter under review. Moreover, rise in the raw material (especially aluminium and steel) costs amid trade tariffs is also anticipated to have clipped the firm’s profit margin.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Advance Auto Parts this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Advance Auto Parts has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.07.

Zacks Rank: Advance Auto Parts currently has a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some companies, which according to our model, have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Yext Inc. (NYSE:YEXT) has an Earnings ESP of +5.56% and is a Zacks #1 Ranked player. The company is expected to release fiscal third-quarter 2020 earnings results on Dec 5.

Horizon Global Corporation (NYSE:HZN) is scheduled to report third-quarter 2019 on Nov 12. The stock has an Earnings ESP of +22.22% and a Zacks Rank #2.

Verso Corporation (NYSE:VRS) is set to release third-quarter earnings on Nov 12. The company has an Earnings ESP of +652.94% and a Zacks Rank of 2.

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