Supply chain complications and chip shortages carry on to affect motor vehicle generation. Also, significant inflation is hurting buyer paying. In this kind of a state of affairs, the need for auto aftermarket components companies like Progress Automobile Areas (NYSE: AAP) could be solid as people today would like to retain or restore their current motor vehicles relatively than acquire a new one particular.

However, the not too long ago declared Q1’22 earnings of sector peer O’Reilly Automotive (ORLY) reflected that the car components suppliers are them selves not immune to substantial inflation and source chain disruptions.

AAP is scheduled to announce its Q1’22 effects after the marketplace closes on May perhaps 23 and host an earnings call on May perhaps 24.

The business finished 2021 on a high take note by posting far better-than-anticipated Q4’21 results back in February. Q4 product sales increased 1.3% to $2.4 billion with comparable retailer gross sales development of 8.2%. The corporation skilled robust restoration in its expert channel and higher desire in its Diy or “do-it-yourself” enterprise. Excluding the added week in the prior-calendar year quarter, Q4’21 altered EPS grew 35.4% to $2.07.

AAP shares are down 18.5% year-to-date amid broader market offer-off.

Q1 Anticipations

Analysts be expecting AAP’s gross sales to develop 1.5% calendar year-above-yr to $3.38 billion in Q1’22 and adjusted EPS to increase about 7% to $3.58.

Even though the business did not offer any precise outlook for Q1, CFO Jeff Shepherd said on the Q4’21 earnings call that he was “encouraged that by way of the initial 4 weeks of 2022, our comp sales are operating previously mentioned the top-end of our total calendar year assistance.”

AAP expects total-yr 2022 product sales in the vary of $11.2 billion – $11.5 billion, up from $11 billion in 2021, and similar retailer revenue development of 1% – 3%. The firm predicts 2022 altered EPS of $13.20 – $13.75, compared to $12.02 in 2021.  

Wall Street’s Choose

Forward of AAP’s Q1 outcomes, Wells Fargo analyst Zachary Fadem retained his FY22 EPS estimate but reduced FY23 EPS estimate to $15.55 from $16.02. He also minimize AAP inventory rate target to $230 from $245.

Fadem mentioned that the company’s DIFM [do-it-for-me] study-throughs seem “encouraging” and he observed bigger sequential pricing in comparison to friends in Q1.

On the other hand, Fadem thinks that AAP is “a margin story, and AAP’s skill to reiterate +40-60bps of FY22 EBIT margin expansion will be a essential needle-mover, specially with inflationary pressures unlikely to abate.”

The major-rated analyst stated that his Hold ranking for AAP reflected a significant bar for FY22 margins, very likely revenue underperformance in contrast to peers AutoZone (AZO), and O’Reilly Automotive, and “historically choppier execution.”  

On TipRanks, AAP scores a Moderate Obtain consensus rating based on a few Purchases and three Holds. The ordinary Advance Car price target of $250.33 implies 28.05% upside prospective from concentrations found in advance of market open up on Thursday.

Summary

Advance Auto faces tough comparison to last year’s spectacular advancement prices. Analysts’ estimates reflect that the firm will go on to expand, nevertheless at reasonable rates. Investors’ focus will be on the company’s Q2’22 update and any possible alterations to a comprehensive-year outlook amid macro difficulties, and provide chain pressures.

It is value noting that Progress Auto scores a “Perfect 10” on TipRanks’ Sensible Rating system, indicating that it is far more most likely to outperform the sector.

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