Could Advance Auto Parts' 2Q17 Earnings Impress Investors?

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Gearing Up for Advance Auto Parts’ 2Q17 Earnings PART 2 OF 3

By John Parker  | Aug 12, 2017 8:54 am EDT

Advance Auto Parts’ 2Q17 estimates

In 1Q17, Advance Auto Parts (AAP) reported adjusted EPS (earnings per share) of $1.46, a 31.8% fall from 2Q16’s EPS of $2.14. In 2Q17, analysts expect the positive trend to continue. Advance Auto Parts’ EPS are expected to be $1.67, about 12.1% lower than its adjusted EPS of $1.90 in 1Q16.

Could Advance Auto Parts’ 2Q17 Earnings Impress Investors?

Revenue estimates for 2Q17

In 1Q17, Advance Auto Parts reported total revenue of $2.9 billion. This reflected a 3.0% YoY (year-over-year) fall from the company’s revenue of $3.0 billion in 1Q16. According to analysts’ estimates, Advance Auto Parts’ 2Q17 revenue could be flat at $2.3 billion, with a minor YoY rise of 0.3%.

Will profit margins improve?

In the last few quarters, Advance Auto Parts’ profit margins have contracted due to increased expenses in inventory optimization efforts. In 1Q17, the company reported a net profit of $108.0 million. It saw a net profit margin of 3.7%, compared with 5.3% in 1Q17.

In 2Q17, analysts expect Advance Auto Parts’ profit margin to recover on a quarter-over-quarter basis, but to remain weak on a year-over-year basis. These estimates suggest that the company’s 2Q17 net profit margins could be 5.3%, slightly lower than the 5.5% it reported in 2Q16.

Auto part sellers’ margins tend to be much wider than those of legacy automakers (XLY), such as General Motors (GM), Ford (F), and Fiat Chrysler Automobiles (FCAU). Continue to the next part for a look at what analysts are recommending for Advance Auto Parts stock.

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