Is Advance Auto Parts Stock a Buy?

Core Viewpoint - Advance Auto Parts is facing significant challenges, including an 83% decline in stock price since early 2022, but potential opportunities may arise if the company successfully implements its restructuring efforts [1][2]. Group 1: Financial Performance - The company reported a full-year EPS of $0.50 for 2023, a substantial drop from $7.65 in 2022, indicating severe profit margin contraction [2]. - In Q2 2024, EPS was $0.75, which fell short of consensus estimates, with net sales growth remaining flat year over year and comparable store sales increasing by only 0.4% [2]. - For 2024, Advance Auto Parts anticipates comparable sales to range between -1% and 0%, with an EPS target of $2.00-$2.50 and a minimum of $100 million in free cash flow [2]. Group 2: Restructuring Efforts - The company is undergoing a major restructuring, including corporate layoffs, aimed at improving its cost structure and returning to profitable growth [2]. - The sale of its WorldPac automotive parts wholesale distribution business for $1.5 billion is expected to close by the end of the year, providing a significant cash infusion to strengthen the balance sheet [5]. Group 3: Market Position and Valuation - Advance Auto Parts operates a network of 4,776 stores, benefiting from a loyal customer base despite current challenges [4]. - The stock is trading at a forward P/E ratio of 18 for 2024, which narrows to 13 for 2025, indicating a potential valuation discount compared to competitors like AutoZone and O'Reilly Automotive [5].