Advance Auto Parts Inc. (AAP) delivered a disappointing second-quarter earnings report, falling short of analysts’ expectations and prompting the company to significantly lower its full-year outlook. The company reported earnings per share of 75 cents, missing the anticipated $1.07. While quarterly sales of $2.683 billion slightly exceeded the expected $2.679 billion, the overall performance was underwhelming.
Advance Auto Parts revised its FY24 outlook downward, reducing its earnings per share forecast to a range of $2.00 to $2.50 from the previous projection of $3.75 to $4.25. This revised forecast falls short of the current analyst estimate of $3.63. The company also adjusted its sales projection to $11.15 billion to $11.25 billion, down from the previous $11.30 billion to $11.50 billion, against the estimated $11.30 billion.
Adding to the somber news, Advance Auto Parts announced a definitive agreement to sell Worldpac, Inc., its automotive parts wholesale distribution business, to funds managed by global investment firm The Carlyle Group Inc. (CG) for $1.5 billion in cash. This strategic move signifies a shift in Advance Auto Parts’ business strategy.
Following the earnings announcement, several analysts adjusted their price targets for Advance Auto Parts. TD Cowen analyst Max Rakhlenko maintained a Hold rating but lowered the price target from $65 to $55. Evercore ISI Group analyst Greg Melich also kept an In-Line rating but cut the price target from $64 to $60.
The combination of weak earnings, a lowered outlook, and the sale of Worldpac led to a significant drop in Advance Auto Parts shares, closing at $51.10 on Thursday, representing a 17.5% decline. Investors are now closely watching how Advance Auto Parts will navigate its revised strategy and address the challenges that led to the disappointing results.
