Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Moretus Research delivers state-of-the-art, buy-side quality equity research for serious investors se ...

Core Viewpoint - Analysts project that Advance Auto Parts (AAP) will report a quarterly loss of $0.82 per share, a decline of 222.4% year over year, with revenues expected to reach $2.5 billion, down 26.6% from the same quarter last year [1]. Earnings Estimates - The consensus EPS estimate for the quarter has been revised 3.6% lower over the last 30 days, indicating a collective reevaluation by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical research shows a strong correlation between earnings estimate revisions and short-term stock performance [3]. Key Metrics Projections - Analysts predict the total number of retail stores for AAP will reach 4,452, down from 5,097 in the same quarter last year [5]. - The average estimate for the number of AAP stores is 4,174, compared to 4,483 a year ago [5]. - The consensus estimate for the number of stores opened is 4, a decrease from 7 in the same quarter last year [5]. - For CARQUEST, the estimated number of stores is 277, down from 294 a year ago [6]. Stock Performance - AAP shares have increased by 9.9% in the past month, while the Zacks S&P 500 composite has risen by 13.1% [7]. - AAP holds a Zacks Rank 1 (Strong Buy), indicating expectations of outperforming the overall market in the near term [7].

Market Overview - The Russell 2000 index, a benchmark for small-cap stocks, has increased by approximately 3.8% this week and 15.7% over the past month, indicating strong momentum in the small-cap sector [1] Interest Rates and Tariffs - Small-cap stocks are sensitive to interest rates, as many rely on debt for operations, making it challenging to absorb higher tariff charges. Interest rates may not decrease as quickly as anticipated, and while progress in U.S.-China tariff negotiations is noted, a finalized agreement is still pending [2] Volatility and Investment Opportunities - Investors should prepare for increased volatility in the next 90 days, but several small-cap stocks mentioned have strong investment potential regardless of tariff and interest rate fluctuations [3] Advance Auto Parts (AAP) - AAP has a 12-month stock price forecast of $45.13, representing a potential upside of 31.10% from its current price of $34.42. Analysts suggest a consensus Hold rating based on 17 ratings [4][5] - The stock is trading near its 52-week low but has risen over 5% in the past week, with a high short interest of over 17%, indicating potential for a short squeeze [6] - AAP's turnaround plan, including closing underperforming stores, is showing positive results, particularly in improving its balance sheet [7] La-Z-Boy (LZB) - LZB has a 12-month stock price forecast of $44.50, indicating a modest upside of 1.00% from its current price of $44.06. The stock has seen a 20% increase this year, partly due to its "Made in America" positioning [9][11] - The company is relatively insulated from tariffs, with much of its production in the U.S., although one-third of its products are still exposed to China [10] - LZB's stock is trading at around 14.9x earnings, which is considered somewhat expensive, but it has recently received an upgrade from KeyCorp with a price target of $46 [11] National Vision Holdings (EYE) - EYE has a 12-month stock price forecast of $17.57, suggesting a downside of 5.53% from its current price of $18.60. The stock was recently upgraded to a Buy from Underperform by Bank of America, with a new price target of $22 [12][13] - The company is implementing a strategic plan that includes price increases of 10% to 15%, which consumers have not resisted so far. However, it anticipates increased costs of $10 to $15 million due to its exposure to China [14] - Following the upgrade, EYE's stock has risen over 50%, prompting a cautionary note for investors to consider waiting for a pullback before investing [15]

The market expects Advance Auto Parts (AAP) to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended March 2025. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be relea ...

Financial Data and Key Metrics Changes - 2024 was a transformative year for the company, marked by decisive actions that positioned it for long-term profitable growth and value creation for shareholders [5] - The company successfully completed the sale of Worldpac for $1.5 billion, strengthening its balance sheet and streamlining operations [5] Business Line Data and Key Metrics Changes - The company made the difficult decision to rationalize its store and distribution center footprint, with over 75% of the revised store footprint in designated market areas where it holds the number one or two position based on store density [6] - Strategic investments were made to enhance competitive position, reduce turnover, and improve customer service [6] Market Data and Key Metrics Changes - The company retained the Carquest Canada business, which resembles the US blended box model and offers additional runway for long-term growth [5] Company Strategy and Development Direction - A strategic plan was introduced focusing on three fundamental areas: merchandising excellence, supply chain, and store operations [7] - The company is focused on execution and has a renewed emphasis on customer-centric strategies [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic direction and the urgency of execution as the company looks to 2025 and beyond [7] - The management team has been strengthened with leaders possessing deep retail expertise and strong functional knowledge [6] Other Important Information - The company held its annual meeting virtually, allowing shareholders to submit questions via a Q&A tool [2] - A quorum was confirmed with 92.23% of outstanding shares present or represented [12] Q&A Session Summary Question: Inquiry about business operations - The company plans to address all industry and business matters in the upcoming earnings call scheduled for May 22 [24][25]

Core Insights - The focus is on the Zacks Rank system, which emphasizes earnings estimates and revisions to identify strong stocks [1] - Value investing is highlighted as a preferred method for finding undervalued stocks through fundamental analysis [2] - The Style Scores system developed by Zacks helps identify stocks with specific traits, particularly those with high grades in the Value category [3] Company Analysis: Advance Auto Parts (AAP) - Advance Auto Parts currently holds a Zacks Rank of 2 (Buy) and an A grade for Value [4] - The stock has a Forward P/E ratio of 16.14, significantly lower than the industry average of 22.77 [4] - Over the past 52 weeks, AAP's Forward P/E has fluctuated between a high of 32.99 and a low of -94.12, with a median of 16.16 [4] - The strong earnings outlook and current valuation suggest that AAP is likely undervalued, making it an impressive value stock [5]

Industry Overview - The Zacks Automotive - Retail and Wholesale - Parts industry involves retail, distribution, and installation of vehicle components, including various parts and accessories [2] - The industry is characterized by fierce competition and is undergoing transformative shifts due to changing customer preferences and technological advancements [2] Factors Influencing the Industry Outlook - The average age of vehicles on U.S. roads has increased from 11.1 years to 12.6 years over the last decade, leading to higher demand for servicing and replacement parts [3] - Consumers are spending more on essential repairs and part replacements to maintain vehicle functionality, contributing to increased demand for auto parts [3] Expansion Efforts - Auto part dealers are expanding into new markets through strategic acquisitions and the establishment of mega hubs, which enhance market share and offerings [4] - Investment in digital platforms is aligned with consumer preferences for online transactions, allowing dealers to reach a broader audience and drive profitability [4] Capital Expenditure Trends - Auto part retailers are increasing capital expenditure to support growth, improve electronic catalogs, expand stores, and enhance supply chain and merchandising projects [5] - These investments may limit near-term cash flows but are essential for long-term business growth [5] Industry Performance and Rankings - The Zacks Auto Retail & Wholesale Parts industry holds a Zacks Industry Rank of 95, placing it in the top 39% of around 250 Zacks industries, indicating bright near-term prospects [6] - The industry has outperformed the S&P 500 and the Auto, Tires, and Truck sector over the past year, with a growth of 10.3% compared to the S&P 500's 8.3% [9] Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 30.99X, significantly higher than the S&P 500's 18.31X and the sector's 16.34X [12] - Over the past five years, the industry's EV/EBITDA ratio has ranged from a high of 32.85X to a low of 18.68X, with a median of 24.15X [13] Company Highlights - **AutoZone**: A leading specialty retailer and distributor of automotive replacement parts, expecting growth in fiscal 2025 driven by strong DIY and commercial performance, with year-over-year sales and EPS growth estimates of 1.78% and 2.74% respectively for fiscal 2025 [17][18] - **Genuine Parts Company (GPC)**: Strengthened by the acquisition of Motor Parts & Equipment Corporation, with a focus on restructuring to realize $100 million to $125 million in additional savings, and year-over-year sales growth estimates of 2.74% for 2025 [21][24] - **Advance Auto Parts (AAP)**: Improved liquidity from the sale of Worldpac for $1.5 billion, allowing a sharper focus on core business operations, with an impressive EPS growth estimate of 644.83% for 2025 [27][28]

Economic Environment and Trade Tariffs - The new economic environment is influenced by trade tariffs implemented by President Trump, affecting consumer psychology and business purchasing decisions [1][2] - The exemption of auto parts and manufacturers from these tariffs is expected to alleviate some concerns in the automotive sector [2] Auto Parts Sales Performance - Auto parts and dealer sales experienced a significant increase of 5.3% in March, reversing a previous contraction trend [4] - This surge is attributed to consumer behavior, as buyers anticipate rising prices due to tariffs [5] Investment Opportunities in Auto Parts Stocks - Three stocks are highlighted as potential beneficiaries of the recent sales shift: AutoZone Inc. (AZO), O'Reilly Automotive Inc. (ORLY), and Advance Auto Parts Inc. (AAP) [3][6] - AutoZone has seen substantial institutional investment, with $6.2 billion entering the stock over the past quarter [8] - O'Reilly Automotive maintains an Overweight rating from Wells Fargo, with a price target of $1,550, indicating a potential 12% upside [11][12] - Advance Auto Parts is viewed as an asymmetric opportunity, trading at 40% of its 52-week high, with a consensus price target of $45.1, suggesting a 42% upside [15][16] Market Sentiment and Analyst Ratings - The decline in short interest for AutoZone indicates a shift in market sentiment towards bullishness [10] - Analysts project a significant earnings growth for O'Reilly, forecasting a 23% increase in EPS [13] - Advance Auto Parts is trading at a premium P/E ratio of 44.80, reflecting strong market confidence in its growth potential [17]

Core Viewpoint - Advance Auto Parts (AAP) has received a Zacks Rank 2 (Buy) upgrade, indicating a positive outlook driven by rising earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the importance of earnings estimate revisions, which are strongly correlated with near-term stock price movements [4][6]. - For Advance Auto Parts, the increase in earnings estimates suggests an improvement in the company's underlying business, likely leading to higher stock prices as investors respond positively [5][8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of generating significant returns, particularly for Zacks Rank 1 stocks [7][9]. - The upgrade of Advance Auto Parts to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [10]. Earnings Estimate Details - Advance Auto Parts is projected to earn $1.58 per share for the fiscal year ending December 2025, reflecting a substantial year-over-year increase of 644.8% [8]. - Over the past three months, the Zacks Consensus Estimate for the company has risen by 1.8%, indicating a positive trend in earnings expectations [8].

Core Viewpoint - Advance Auto Parts is positioning itself for sustainable growth by simplifying its structure and increasing store count, targeting 30 new stores in 2025 and an additional 100 by the end of 2027, representing nearly a 3% increase in store presence [1] Group 1: Financial Performance and Projections - The stock is currently trading at $34.86, down 4.80% with a 52-week range of $33.08 to $79.85, and a dividend yield of 2.87% [2] - Analysts predict a return to growth in the next fiscal year with adjusted earnings expected to grow at a double-digit CAGR through the middle of the next decade [3] - The company has faced challenges with growth and operational quality, leading to an 85% cut in dividends, which were previously increased aggressively starting in 2020 [2] Group 2: Market Sentiment and Insider Activity - Insider buying activity has increased, with notable purchases from the CEO and a director, indicating confidence in the company's future [4] - Institutional investors have consistently bought the stock since Q4 2023, owning nearly 90% of the stock, providing a solid support base [5] - Analysts have a Hold rating on the stock, with a price target reset that suggests a potential 20% upside [5] Group 3: Short Interest and Market Dynamics - Short interest remains high, down from peaks in 2021 and 2022, but could lead to a short-covering rally if growth resumes [6] - The stock is trading at a 15-year low, indicating deep value, with signs of a potential market reversal [7] - A rebound could see the stock reclaim highs set in 2024, representing a potential 100% upside, although resistance is noted near $45.75 [8]