Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Advance Auto Parts Popped 8% Tuesday

By Daniel Miller - Updated Aug 15, 2018 at 9:35AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of Advance Auto Parts are moving higher after strong second-quarter results and improved industry outlook.

What happened?

Shares of Advance Auto Parts (AAP -1.64%), a leading automotive aftermarket parts provider for professional installers and do-it-yourself consumers, are up 8% as of 3:25 p.m. EDT Tuesday after a strong second-quarter result. In fact, the company's strong earnings result even boosted the share price of its competitors: AutoZone, Inc. (AZO 5.82%) popped more than 5% during early afternoon trading, and O'Reilly Automotive (ORLY 5.02%) also logged a smaller 3% gain.

So what

Advance reported a 2.8% sales increase to $2.33 billion, which topped analysts' estimates looking for $2.27 billion. The top-line result was driven by a 2.8% increase in same-store sales, which topped estimates for only 0.1% growth. Adjusted earnings per share checked in at $1.97, well ahead of analysts' estimates calling for $1.86 per share.

Mechanic changing filter of a car

Image source: Getty Images.

President and Chief Executive Officer Tom Greco said the following in a press release:

Our relentless focus on strengthening our Customer Value Proposition while embracing an owner's mindset on cost and cash resulted in improved sales and profit performance in the second quarter. I am encouraged by the progress our team made during the first half of 2018 and confident in our ability to drive growth throughout the balance of 2018.

Now what

Management also raised its full-year revenue guidance to a range of $9.3 billion to $9.5 billion thanks to the strong start to 2018 and noted that industry demand continues to improve. Advance also announced a new share repurchase program authorized for $600 million, with plans to return $100 million to $200 million to shareholders through buybacks during the second half of 2018. You could argue that share buybacks aren't the best use of capital -- Advance isn't cheap, trading at a price-to-earnings ratio near 23 times -- but between rising same-store sales, profits that topped estimates, and increased full-year guidance, there was plenty for investors to like about Advance's second quarter.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Advance Auto Parts, Inc. Stock Quote
Advance Auto Parts, Inc.
$180.23 (-1.64%) $-3.01
AutoZone, Inc. Stock Quote
AutoZone, Inc.
$1,910.22 (5.82%) $105.00
O'Reilly Automotive, Inc. Stock Quote
O'Reilly Automotive, Inc.
$608.18 (5.02%) $29.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.