On Friday, Jefferies made adjustments to its outlook on shares of Advance Auto Parts (NYSE: NYSE:AAP), decreasing the price target from $100.00 to $85.00, but continuing to endorse the stock with a Buy rating. The firm's analysis pointed to a second-quarter comparable sales increase of 0.4% and earnings per share (EPS) of $0.75, which contrasts with the consensus of a 0.5% decrease and an EPS of $0.93.
The report noted that the company's earnings before interest and taxes (EBIT) margin declined by 200 basis points year-over-year to 2.7% due to price investments and increased labor spending, even though sales exceeded expectations.
The recent announcement regarding the sale of Worldpac for $1.5 billion was highlighted as a critical component of Advance Auto Parts' potential multi-year improvement strategy. According to Jefferies, the sale price matched their forecasts and is set to provide a substantial cash influx to the company.
Despite the revised guidance for the second half of the year indicating that there is still considerable work to be done to catch up with competitors in a challenging macroeconomic environment, Jefferies sees potential for stock value growth by 2025 as the improvement plan unfolds. The firm's commentary suggests that while immediate hurdles persist, there is optimism for the company's long-term prospects.
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