What happened

Shares of Advance Auto Parts (NYSE:AAP) jumped 11.2% last month, according to data provided by S&P Global Market Intelligence, after a positive third-quarter earnings report. The stock price has rebounded strongly in 2018 after being cut in half in 2017. The latest quarterly report showed the company continuing to make progress in its turnaround efforts.

So what

The auto-parts retailer delivered better-than-expected performance on the top and bottom lines. For the third quarter, revenue grew 4.3% to $2.3 billion, driven by comparable-store sales growth of 4.6%. This was the company's highest comp sales growth in nearly eight years, which management attributed to an improved customer value proposition. A lower tax rate boosted earnings per share by 20% year over year to $1.56.

A man standing in the aisle of an auto-parts store while examining a container of oil.

IMAGE SOURCE: GETTY IMAGES.

Overall, CEO Thomas Greco credited better execution throughout the company for the improved performance:

Without a doubt, we're seeing better coordination and planning across our merchandising, marketing and field operations teams, which is also contributing to our momentum. Finally, we're leveraging supplier partnerships and improved analytical capabilities to ensure we have the right inventory, in the right locations, at the right time.

Now what

Management is excited about the growth opportunity in its do-it-yourself (DIY) omnichannel business. The company had its second straight quarter of sales growth in both DIY retail and DIY online. Additionally, Advance Auto Parts announced a DIY partnership with Walmart (NYSE:WMT), which will allow the auto-parts retailer to reach 100 million unique visitors to Walmart.com every month. Management believes this partnership will help Advance Auto Parts continue to gain market share.

The improved performance this year has fueled a rapid rebound in the stock price, which is up 71% over the last year and trades for about 21 times next year's earnings estimates. Wall Street analysts currently expect the company to grow revenue 2% this year and next, with adjusted earnings per share expected to reach $7.10 per share in 2018, representing growth of 32% over 2017. From there, analysts expect earnings to grow 18% per year over the next five years.

Greco is particularly optimistic about the expected growth in the number of aging vehicles next year, which is the largest demand driver in the auto-parts industry. This should allow Advance Auto Parts to keep its current momentum going for the foreseeable future.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.