On Monday, Mizuho Securities adjusted its outlook on Advance Auto Parts (NYSE:AAP) shares, reducing the price target to $64.00 from the previous $78.00, while maintaining a Neutral rating on the stock. The revision follows the company's first-quarter results, which did not meet expectations.
The firm revised its full-year 2024 earnings per share (EPS) estimate for Advance Auto Parts to $3.40, a decrease from the prior estimate of $3.58. Similarly, projections for the following years were also reduced, with the fiscal year 2025 earnings estimate now at $4.25, down from $4.35, and the fiscal year 2026 estimate at $5.15, decreased from $5.30.
The new price target is based on a 15 times multiple of the firm's fiscal year 2025 revenue estimate, a reduction from the previously applied 18 times multiple. This change reflects a more conservative valuation approach in light of the lower-than-anticipated quarterly performance.
Advance Auto Parts' recent earnings report has led to a reassessment of its future profitability, prompting Mizuho Securities to adjust its earnings estimates for the next several years. The firm's cautious stance is evident in the reduced price target and unchanged Neutral rating.
In other recent news, Advance Auto Parts has been the focus of several analyst reports. RBC Capital has maintained a "Sector Perform" rating on the company's shares, but reduced the price target from $68.00 to $65.00, citing challenges in the Do-It-Yourself (DIY) sector.
Additionally, Evercore ISI has cut the company's price target from $80.00 to $72.00, while maintaining an "In Line" rating. Citi also reiterated its Neutral rating on the company's shares, with a consistent price target of $70.00.
These adjustments come as Advance Auto Parts grapples with persistent weakness in the DIY sector and navigates through a transformative period. The company is in the early stages of a turnaround, with a strategic focus on improving sales productivity.
Analysts have adjusted their earnings per share (EPS) projections for the company, with RBC Capital Markets revising its estimates to $3.64 for FY’24 and $4.32 for FY’25.
Amid these changes, Advance Auto Parts has disclosed an additional material weakness in its internal control over financial reporting, pertaining to ineffective control activities. Despite this, the company has concluded that the errors were not material to its previously issued financial statements.
The company is also undergoing a strategic review, including the potential sale of Worldpac. The outcome of this sale is a key event for investors, as it could provide more clarity on the company's future direction. These developments highlight the company's ongoing efforts to enhance its operations and navigate a competitive landscape.
InvestingPro Insights
Following the recent earnings report and Mizuho Securities' updated assessment of Advance Auto Parts, real-time data from InvestingPro provides additional context for investors. The company's market capitalization stands at $3.82 billion, with a notably high P/E ratio of 128.7, reflecting a premium valuation as of the last twelve months ending Q4 2023. Despite a modest revenue growth of 1.19% during the same period, the stock has experienced a significant 13.93% decline in the past month, which may have contributed to Mizuho Securities' cautious outlook.
InvestingPro Tips highlight that Advance Auto Parts is expected to see net income growth this year and has maintained dividend payments for 19 consecutive years, suggesting a level of financial stability and commitment to shareholders. However, the stock is trading at a high EBIT valuation multiple, which could be a point of concern for value-focused investors. For those considering a deeper analysis, there are additional InvestingPro Tips available, offering a comprehensive understanding of the company's financial health and market position.
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