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1. Company Snapshot

1.a. Company Description

Advance Auto Parts, Inc.provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks.The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts; exhaust systems and parts; hub assemblies; ignition components and wires; radiators and cooling parts; starters and alternators; and steering and alignment parts.


It also offers air conditioning chemicals and accessories; air fresheners; antifreeze and washer fluids; electrical wires and fuses; electronics; floor mats, seat covers, and interior accessories; hand and specialty tools; lighting products; performance parts; sealants, adhesives and compounds; tire repair accessories; vent shades, mirrors and exterior accessories; washes, waxes and cleaning supplies; and wiper blades.In addition, the company offers air filters; fuel and oil additives; fuel filters; grease and lubricants; motor oils; oil filters, part cleaners and treatments; and transmission fluids for engine maintenance.Further, it offers battery and wiper installation; engine light scanning and checking; electrical system testing; video clinic; oil and battery recycling; and loaner tool program services.


Additionally, the company sells its products through its website.It serves professional installers and do-it-yourself customers.The company operates stores under the Advance Auto Parts, Autopart International, and Carquest brands, as well as branches under the Worldpac name.


As of April 23, 2022, it operated 4,687 stores and 311 branches in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada; and served 1,318 independently owned Carquest branded stores in Mexico, Grand Cayman, the Bahamas, Turks and Caicos, and the British Virgin Islands.The company was founded in 1929 and is based in Raleigh, North Carolina.

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1.b. Last Insights on AAP

Advance Auto Parts' recent performance was negatively impacted by a supplier's Chapter 11 bankruptcy filing, sparking investor concerns. Despite beating Q3 earnings estimates with stronger sales, the company narrowed its 2025 sales outlook. AAP's growth strategy includes new store openings, a unified supply chain, and an updated operating model to counter DIY pressure and debt. Institutional investors, including Envestnet Asset Management, Bank of New York Mellon Corp, and Geode Capital Management, have increased their stakes in the company, signaling potential confidence in its prospects.

1.c. Company Highlights

2. Advance Auto Parts' Q3 Earnings: A Step in the Right Direction

Advance Auto Parts reported a net sales decline of 5% to $2 billion in Q3, but comparable sales growth was positive at 3%, driven by both Pro and DIY channels. Adjusted operating margin expanded by 370 basis points year-over-year to 4.4%, demonstrating progress on the execution of their strategic plan. Adjusted diluted earnings per share from continuing operations was $0.92, beating estimates of $0.74. The company's gross margin expansion was about 260 basis points compared to last year, driven by adjustments in pricing in response to market dynamics.

Publication Date: Nov -14

📋 Highlights
  • Comparable Sales Growth:: Achieved 3% growth in Q3, with both Pro and DIY channels contributing to the increase.
  • Adjusted Operating Margin:: Expanded 370 basis points YoY to 4.4%, driven by strategic execution and cost management.
  • Liquidity Strengthening:: Raised nearly $2 billion in cash, enhancing liquidity and supporting progress toward an investment-grade credit rating.
  • EPS Improvement:: Adjusted diluted EPS rose to $0.92 from a $0.05 loss YoY, reflecting operational efficiency gains.
  • Supply Chain Optimization:: Atlanta hub greenfield delivered a 100-basis point sales lift, with plans to accelerate hub openings to 60 by mid-2027.

Operational Highlights

The company's focus on merchandising, supply chain, and store operations is yielding results, with the technology team designing a multiyear roadmap to support the effective execution of their plan, including the use of generative AI content and AI-based applications in routine processes. The Atlanta hub greenfield has been performing well, with a 100 basis point lift for supported stores, and the company plans to accelerate the opening of market hubs, aiming for 60 by mid-2027.

Guidance and Outlook

Advance Auto Parts reaffirmed the midpoint of their prior comparable sales growth and adjusted operating margin guidance. They expect net sales of $8.55 billion to $8.6 billion, including comparable sales growth between 0.7% to 1.3%. Analysts estimate next year's revenue growth at 0.9%. The company's adjusted EPS guidance is a range of $1.75 to $1.85, including slightly higher interest income compared to prior expectations.

Valuation

With a P/E Ratio of -8.0, the market is pricing in significant challenges for the company. However, the P/S Ratio of 0.35 suggests that the stock may be undervalued relative to its sales. The company's ROE is -17.19%, indicating that it is still struggling to generate returns for shareholders. As the company continues to execute its turnaround plan, investors will be watching for progress on margin expansion and cash flow generation.

3. NewsRoom

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Geode Capital Management LLC Purchases 461,761 Shares of Advance Auto Parts, Inc. $AAP

Nov -24

Source: defenseworld.net

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Here's Why You Should Retain Advance Auto Stock in Your Portfolio Now

Nov -20

Source: zacks.com

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Envestnet Asset Management Inc. Raises Stake in Advance Auto Parts, Inc. $AAP

Nov -17

Source: defenseworld.net

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Bank of New York Mellon Corp Raises Stock Holdings in Advance Auto Parts, Inc. $AAP

Nov -17

Source: defenseworld.net

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Advance Auto Beats Q3 Earnings Estimates, Narrows 2025 Sales Outlook

Nov -04

Source: zacks.com

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Advance Auto Parts, Inc. $AAP Shares Sold by State of New Jersey Common Pension Fund D

Nov -03

Source: defenseworld.net

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Advance Auto Parts, Inc. (AAP) Q3 2025 Earnings Call Transcript

Oct -30

Source: seekingalpha.com

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Advance Auto Parts (AAP) Q3 Earnings: Taking a Look at Key Metrics Versus Estimates

Oct -30

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.80%)

6. Segments

Parts and Batteries

Expected Growth: 1.8%

Advance Auto Parts' 1.8% growth in Parts and Batteries is driven by increasing demand for DIY and professional repair services, expansion of online sales channels, and strategic partnerships with key suppliers. Additionally, the company's focus on improving inventory management and supply chain efficiency has enabled it to better meet customer needs and capitalize on market opportunities.

Accessories and Chemicals

Expected Growth: 1.5%

Advance Auto Parts, Inc.'s Accessories and Chemicals segment growth of 1.5% is driven by increasing demand for DIY car maintenance, rising average vehicle age, and growing popularity of e-commerce platforms. Additionally, the company's strategic investments in digital capabilities, expanded product offerings, and strong supplier relationships contribute to the segment's growth.

Engine Maintenance

Expected Growth: 2.2%

The 2.2% growth in Engine Maintenance from Advance Auto Parts, Inc. is driven by increasing vehicle age, rising miles driven, and growing demand for DIY repair and maintenance. Additionally, the company's strategic initiatives, such as its loyalty program and online platform enhancements, contribute to the segment's growth.

Other

Expected Growth: 1.9%

Advance Auto Parts, Inc.'s 1.9% growth in 'Other' segment is driven by increasing demand for DIY and commercial vehicle repair services, expansion of online platforms, and strategic partnerships with key suppliers. Additionally, the company's focus on improving customer experience and investing in digital capabilities have contributed to this growth.

7. Detailed Products

Auto Parts

Replacement parts for vehicles, including batteries, brakes, belts, and hoses

Accessories

Add-on products to enhance vehicle appearance and functionality, such as floor mats, seat covers, and steering wheel covers

Chemicals and Fluids

Lubricants, coolants, and other chemicals for vehicle maintenance and repair

Tools and Equipment

Hand tools, power tools, and diagnostic equipment for DIY and professional mechanics

Performance and Racing

High-performance parts and accessories for enthusiasts and racing applications

Collision Repair

Parts and materials for repairing and refinishing vehicles after accidents or damage

Commercial and Fleet Solutions

Customized solutions for commercial fleets, including parts, maintenance, and repair services

8. Advance Auto Parts, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Advance Auto Parts, Inc. faces moderate threat from substitutes, as customers can opt for alternative sources for auto parts, such as online retailers or salvage yards. However, the company's strong brand recognition and wide range of products mitigate this threat to some extent.

Bargaining Power Of Customers

Advance Auto Parts, Inc. has a large customer base, which reduces the bargaining power of individual customers. Additionally, the company's wide range of products and services makes it difficult for customers to switch to alternative suppliers.

Bargaining Power Of Suppliers

Advance Auto Parts, Inc. relies on a large network of suppliers for its products. While the company has some bargaining power due to its size, suppliers may still exert some pressure on prices and delivery terms.

Threat Of New Entrants

The auto parts retail industry has high barriers to entry, including significant capital requirements and complex logistics. This makes it difficult for new entrants to compete with established players like Advance Auto Parts, Inc.

Intensity Of Rivalry

The auto parts retail industry is highly competitive, with several established players competing for market share. Advance Auto Parts, Inc. faces intense rivalry from competitors like O'Reilly Automotive and AutoZone, which can lead to pricing pressure and advertising wars.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 46.97%
Debt Cost 3.95%
Equity Weight 53.03%
Equity Cost 10.22%
WACC 7.27%
Leverage 88.56%

11. Quality Control: Advance Auto Parts, Inc. passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Ulta Beauty

A-Score: 5.5/10

Value: 3.4

Growth: 7.7

Quality: 6.5

Yield: 0.0

Momentum: 9.0

Volatility: 6.7

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Etsy

A-Score: 5.4/10

Value: 6.0

Growth: 7.8

Quality: 7.0

Yield: 0.0

Momentum: 8.5

Volatility: 3.3

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Advance Auto Parts

A-Score: 4.9/10

Value: 9.0

Growth: 1.6

Quality: 4.4

Yield: 4.0

Momentum: 9.0

Volatility: 1.3

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Carvana

A-Score: 4.2/10

Value: 0.8

Growth: 7.6

Quality: 6.3

Yield: 0.0

Momentum: 9.0

Volatility: 1.7

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Wayfair

A-Score: 4.0/10

Value: 5.7

Growth: 4.6

Quality: 4.0

Yield: 0.0

Momentum: 8.0

Volatility: 1.7

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RH

A-Score: 2.9/10

Value: 6.9

Growth: 2.9

Quality: 4.4

Yield: 0.0

Momentum: 1.5

Volatility: 2.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

53.94$

Current Price

53.94$

Potential

-0.00%

Expected Cash-Flows