(By Salman - iStockAnalyst Writer)Advance Auto Parts Inc.(
) is scheduled to report its
second quarter earnings before the market open on Thursday, August 13, 2009. Analysts expect the company to report per-share earnings of 83 cents on revenue of $1.31 billion. In the year ago period, the company reported earnings of 79 cents per share on revenue of $1.24 billion.
Advance Auto Parts, Inc., through its subsidiaries, operates as a retailer of automotive parts, accessories, and maintenance items to do-it-yourself and do-it-for-me customers in the automotive aftermarket industry. The company operates in two segments, Advance Auto Parts (AAP), and AI. The company's total store count at the end of the quarter was 3,405 including 135 AI stores. Advance Auto Parts has the second largest network of auto parts stores in the US.
The company reported first quarter net income of $93.6 million or $0.98 per share, compared to $82.1 million or $0.86 per share in the prior year quarter. Total sales for the first quarter jumped 10.3% to $1.68 billion from $1.53 billion in the first quarter of fiscal year 2008. Analysts on average expected the company to earn $0.92 per share for the quarter on revenue of $1.59 billion. Institutions own 98% of the shares in the company and have been increasing their purchases for the past 8 quarters.
The company has continued to perform well despite severe recession and slump in auto industry. Same store commercial sales were up an impressive 17.5% in the first quarter from last year. Comparable store sales increased 8.2% during the quarter. The gross margin expanded to 48.8% from 47.5%, thanks to a higher-margin product mix, reduced inventory shrink, and better purchasing efficiencies. Advance Auto Parts has a solid operating cash flow, which the is more than sufficient to meet all working capital and capital expenditure requirements. Free cash flow for the quarter was $201.4 million or a 34% increase over prior year’s first quarter primarily driven by an increase in net income, a decrease in owned inventory and the timing of tax payments.
In the US, increases in the number and age of vehicles, number of miles driven annually, licensed drivers, and total number of light trucks provide for a relatively steady and growing automotive parts market. The company has been posting stronger results as consumers put off buying new vehicles and are opting to keep their current vehicle running longer. As people buy fewer new cars, they are spending money on repairing their existing cars, which is helping Advance Auto.According to Standard & Poor's Equity Research, U.S. car sales are expected to total 9.3 million this year- nearly 7 million fewer than the natural replacement cycle. Moreover, Americans are holding on to their cars longer than they used to, with the median age of cars on the road in 2008 rising to a record high of 9.4 years, according to R.L. Polk & Co.
The company is benefiting from the new trend as it primarily focuses on the do-it-yourself customers. The do-it-yourself market is an estimated $28 billion in auto parts and related items a year. The market is growing at 1.6 percent annually. Advance's share of DIY market is approximately 13%.
The auto-parts retailer is also poised to benefit from the hundreds of dealership closings announced by Chrysler LLC and General Motors .GM, which has already notified 1,100 of its 6,000 dealerships plans to cut its dealers by about one-third. Chrysler LLC too has dropped nearly Chrysler, or about a quarter of its network, as part of its bankruptcy restructuring.
Shares of the company are currently trading at roughly 14 times consensus 2011 EPS estimates. In terms of stock performance, Advance Auto Parts shares have gained 42% since the beginning of the year. On Thursday, shares of the company fell 1 cents or 0.02% to $45.16.
Disclosure: Author doesn’t own any of the stocks mentioned here.
