Advance Auto Parts (AAP +0.30%) will release its fourth-quarter earnings in a couple of days, and investors appear to be getting excited ahead of them. The stock rose another 5.4% today, and is up a remarkable 51.9% in 2026 alone.
Advance Auto Parts, a deep value stock for 2026
I discussed the stock earlier this year and highlighted its deep value opportunity it which still exists today. Simply put, the company's operational metrics are so far behind peers like O'Reilly Automotive and AutoZone that all it will take is an improvement to something like their levels, and its stock price will soar.
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Key Data Points
It's a compelling case, but it's been so for over a decade, and previous management teams and activist investors have failed to deliver. That said, CEO Shane O'Kelly's fundamental restructuring is the most comprehensive attempt to date, and he deserves the benefit of the doubt. As the ex CEO of HD Supply (Home Depot's industrial distributor of products to professional facilities managers) O'Kelly clearly has extensive experience in managing vast amounts of the right stock-keeping units (SKUs) being delivered to customers on time.
In essence, that's the key to the auto parts retailing business, and unfortunately, Advance Auto doesn't have a great track record of doing it.
O'Kelly's turnaround
All of that said, his aggressive closure of over 700 locations, opening of new stores in geographic areas where the company leads the market, and focus on opening larger market hub stores , which will help make more SKUs available to customers and improve same-day delivery to customers, makes sense.
Image source: Getty Images.
Investors will be hoping the forthcoming results reveal some improvement in profit margins and positive guidance for 2026. With auto parts companies like 3M talking about a weak aftermarket, and a paint company (aftermarket coatings) like RPM International recently reporting weak sales, investors can't expect much help from Advance's end markets. //www.rpminc.com/media/6890/q2-26-rpm-earnings-release-final-010826.pdf
With the bar set pretty low, Advance could probably report weak sales growth, but if margins and cash flow guidance signal progress, the stock could respond well to its upcoming results.
