Advance Auto Parts Races Past Earnings Estimates. The Stock Falls Anyway.

The automotive supplier is in year one of an attempted turnaround plan. (Tierney L. Cross/Getty Images)

Key Points

• Advance Auto Parts reports third-quarter earnings of 92 cents a share, exceeding analysts’ expectations of 76 cents.
• Third-quarter same-store sales increase by 3%, surpassing the 2.3% growth anticipated by analysts.
• The company narrows its full-year same-store sales growth forecast to 0.7% to 1.3% and adjusted earnings to $1.75 to $1.85 per share.

Shares of Advance Auto Parts fell Thursday even after the automotive supplier reported better-than-expected quarterly results.

The company posted earnings of 92 cents a share for the third quarter, beating Wall Street’s call for 76 cents. Sales totaled $2 billion, in line with analysts’ estimates, with same-store sales rising 3% from the prior year. Analysts had expected same-store growth of 2.2%, according to FactSet.

Advance Auto stock fell 3.5% on Thursday, having risen more than 20% at one point in premarket trading. Shares were up 17% this year through Wednesday’s close and 53% over the last 12 months.

“We delivered our strongest quarterly performance in over two years,” said CEO Shane O’Kelly, noting the company remains in the first year of an attempted long-term turnaround.

Advance Auto anticipates same-store sales growth of 0.7% to 1.3% for the year, narrowing its previous range of 0.5% to 1.5%. Adjusted earnings are expected to come in between $1.75 and $1.85 a share, representing a slight uptick at the midpoint from the company’s previous estimate of $1.20 to $2.20 a share.

On a conference call, O’Kelly expressed optimism about the future of the auto parts sector, but noted the company is monitoring the health of low- and middle-income consumers.

“I do think consumers are adjusting their budgets in response to the inflationary environment,” the chief executive said. “And I think the cost of some routine jobs has moved up a bit, which may make them reconsider some of their intervals in which they do maintenance with us.”

Bankruptcies, delinquencies, and alleged fraud among car dealers, lenders, and parts businesses have also raised questions about the health of the auto market. Most notably, auto-parts supplier First Brands, which provides parts to retailers like Advance Auto, filed for bankruptcy last month.

O’Kelly assured investors the company gets products from hundreds of other suppliers, helping to minimize any operational disruptions. The CEO also moved to quash market concerns about its own supply chain financing.

“We do not believe these concerns are applicable to us,” O’Kelly said on the conference call. “Advance’s suppliers continue to receive early payments on their confirmed invoices through our network of large, reputable banks.”

Write to Nate Wolf at nate.wolf@barrons.com