CFRA cuts Advance Auto Parts stock target, maintains Hold rating By Investing.com

CFRA has made significant adjustments to its expectations for Advance Auto Parts (NYSE: NYSE:), reducing the 12-month price target from $70 to $55 while maintaining a Hold rating on the stock.

The revision follows the company’s reported second-quarter earnings per share (EPS) of $0.75, which fell notably short of the anticipated $0.91 consensus.

The analyst from CFRA commented on the factors contributing to the earnings miss, highlighting an unexpectedly high tax rate of 27.5% compared to the consensus estimate of 23.4%.

Despite this, Advance Auto Parts achieved a slight increase in comparable store sales of 0.4%, which was 80 basis points above the consensus, and a marginal revenue beat with $2.68 billion reported against the consensus of $2.67 billion.

The company’s gross margin showed a contraction, coming in at 41.5%, which was a 100 basis point decrease year-over-year but still 10 basis points above the consensus forecast. In response to the quarterly performance, Advance Auto Parts has revised its net sales and EPS guidance for 2024 downward to a range of $11.15 billion to $11.25 billion and $2.00 to $2.50, respectively, from the previous forecast of $11.3 billion to $11.4 billion and $3.75 to $4.25.

In addition to the earnings update, Advance Auto Parts announced the sale of its Worldpac auto parts distribution business to Carlyle for $1.5 billion. The transaction involves a business segment that has generated trailing twelve months (TTM) revenue of $2.1 billion and EBITDA of $100 million.

In other recent news, Advance Auto Parts has reported significant developments. The company’s second-quarter earnings per share (EPS) fell short of market expectations by approximately 13%, primarily due to elevated selling, general and administrative expenses, despite exceeding revenue forecasts. Additionally, Advance Auto Parts announced the sale of Worldpac to Carlyle for $1.5 billion, bolstering the company’s balance sheet.

However, the company significantly reduced its fiscal year 2024 EPS guidance by 44% at the midpoint, a move that Citi analysts noted raises concerns about the company’s confidence in its margin execution. The company’s quarterly earnings per share was $0.75, missing analyst estimates of $0.94, and revenue was $2.68 billion, slightly above expectations.

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