Core Insights - Zacks Premium offers various tools to help investors navigate the stock market confidently and effectively [1] - The Zacks Style Scores are designed to complement the Zacks Rank, providing additional metrics for stock selection [3][8] Zacks Style Scores - The Zacks Style Scores categorize stocks into four types: Value Score, Growth Score, Momentum Score, and VGM Score, each focusing on different investment strategies [4][5][6][7] - Value Score emphasizes finding undervalued stocks based on financial ratios [4] - Growth Score assesses stocks based on their future earnings and financial health [5] - Momentum Score identifies stocks with favorable price trends and earnings outlooks [6] - VGM Score combines all three styles to provide a comprehensive evaluation of stocks [7] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to guide investors in stock selection [8] - Stocks rated 1 (Strong Buy) have historically produced an average annual return of +23.86% since 1988, significantly outperforming the S&P 500 [9] - There are over 800 stocks rated 1 and 2, which can be overwhelming for investors [9] Stock Example: Advance Auto Parts (AAP) - Advance Auto Parts operates in the U.S. automotive aftermarket, selling replacement parts and accessories [12] - AAP holds a 3 (Hold) rating on the Zacks Rank, with a VGM Score of A and a Momentum Style Score of A [13] - AAP's shares have increased by 22.3% over the past four weeks, with positive earnings estimate revisions for fiscal 2026 [13] - AAP's average earnings surprise stands at +56%, making it a noteworthy stock for investors [13][14]

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Company Overview - Advance Auto Parts, Inc. operates in the U.S. automotive aftermarket industry, focusing on selling replacement parts, accessories, batteries, and maintenance items for various vehicles [11] - The company serves both do-it-yourself (DIY) customers and professional installers, as well as independently owned operators, making it a leading automotive parts provider in North America [11] Zacks Rank and Style Scores - Advance Auto Parts is currently rated 3 (Hold) on the Zacks Rank, indicating a neutral outlook [12] - The company has a VGM Score of B, reflecting a favorable combination of value, growth, and momentum characteristics [12] - The Value Style Score is also rated B, supported by attractive valuation metrics such as a forward P/E ratio of 20.59, which may appeal to value investors [12] Earnings Estimates - In the last 60 days, five analysts have revised their earnings estimates upwards for fiscal 2026, with the Zacks Consensus Estimate increasing by $0.02 to $2.72 per share [12] - Advance Auto Parts has demonstrated an average earnings surprise of +56%, indicating a strong performance relative to expectations [12] Investment Consideration - With a solid Zacks Rank and top-tier Value and VGM Style Scores, Advance Auto Parts is suggested to be on investors' short list for potential investment opportunities [13]

Group 1 - The company reported fourth-quarter adjusted earnings per share of 86 cents, exceeding the analyst consensus estimate of 42 cents [1] - Quarterly sales reached $1.973 billion, surpassing the Street view of $1.952 billion [1] Group 2 - For fiscal 2026, the company expects adjusted earnings of $2.40 to $3.10 per share, compared to analysts' estimate of $2.66 [2] - The company forecasts sales between $8.485 billion and $8.575 billion, while the estimate stands at $8.668 billion [2] - Following the earnings announcement, Advance Auto Parts shares dipped 2.8% to trade at $57.19 [2] Group 3 - BMO Capital analyst maintained the stock with a Market Perform rating and raised the price target from $55 to $60 [3] - Truist Securities analyst maintained the stock with a Hold rating and increased the price target from $48 to $57 [3] - RBC Capital analyst maintained the stock with a Sector Perform rating and raised the price target from $57 to $63 [3]

Core Viewpoint - Advance Auto Parts, Inc. reported strong fourth-quarter earnings that exceeded analyst expectations, indicating positive momentum and a potential recovery in sales growth Group 1: Fourth Quarter Performance - The company delivered adjusted earnings per share of $0.86, significantly above the consensus estimate of $0.43 [1] - Revenue totaled $2.0 billion, surpassing analyst projections of $1.95 billion [1] - Comparable sales increased by 1.1% in the fourth quarter, reflecting positive momentum during the final eight weeks of the period [2] - An extra week in the quarter contributed approximately $132 million to net sales and added $0.08 to adjusted EPS [2] Group 2: Full-Year 2025 Results - For full-year 2025, Advance Auto Parts recorded a 0.8% increase in comparable store sales, marking a return to positive growth after three consecutive years of declines [3] - The company expanded its adjusted operating income margin by more than 200 basis points to 2.5%, consistent with its full-year guidance [3] Group 3: Fiscal 2026 Projections - Looking ahead to fiscal 2026, the company projected comparable sales growth of 1.0% to 2.0% [4] - Adjusted operating income margin is expected to range between 3.8% and 4.5% [4] - Earnings per share are anticipated to range from $2.40 to $3.10, compared to the analyst consensus of $2.63 [4] - Revenue is forecasted between $8.49 billion and $8.58 billion, slightly below the consensus estimate of $8.67 billion [4]

Restructuring and Financial Performance - The Company announced the completion of its 2024 Restructuring Plan, which involved closing approximately 500 store locations and 200 independent store locations, aiming to improve profitability and growth potential [58]. - The Company expects to incur an additional $30 million to $40 million in restructuring charges through fiscal 2026, primarily related to costs associated with closed stores and lease terminations [46]. - The Company sold its Worldpac business in fiscal year 2024, with a final net working capital adjustment of $31 million exceeding the original estimate, indicating potential risks in realizing anticipated benefits from divestitures [49]. - The Company has a significant level of indebtedness, which could restrict operations and make it difficult to satisfy debt obligations [84]. - Conditions in global credit markets could adversely affect the Company's access to financing and the terms of that debt [86]. - Decreased overall demand for the Company's products could negatively impact financial performance and stock price [88]. - The company’s level of indebtedness could restrict operations and limit cash flow available for capital expenditures and acquisitions [100]. - A hypothetical 100 basis points change in interest rates could have an annualized impact of approximately $31 million based on the company's cash and cash equivalents [196]. Supply Chain and Operational Efficiency - The Company is investing in supply chain efficiency by converting distribution centers and stores into market hubs, which may require significant capital investments [52]. - The Company relies on a diverse supplier base, and disruptions in the global supply chain could negatively impact costs and inventory availability [56]. - The Company is investing in information and technology systems, including artificial intelligence, to improve operational efficiency, but faces risks related to implementation and data accuracy [50][51]. - The Company’s inventory and ability to meet customer expectations may be adversely affected by geopolitical changes, inflation, and supply chain disruptions [94]. - Rising energy prices directly impact the company's operating and product costs, including supply chain and utility expenses [98]. Market Competition and Demand - The Company closed approximately 500 store locations as part of its restructuring, but competitors are opening new stores at a faster pace, threatening its market position [58]. - The company faces a decrease in vehicle maintenance and repair demand due to fewer vehicles on the road and increased use of ride-sharing services [89]. - Economic conditions may lead consumers to defer vehicle maintenance, impacting sales and reducing the number of cars requiring repairs [89]. - The average duration of vehicle manufacturer warranties has increased, resulting in newer cars needing fewer repairs, which may affect aftermarket parts sales [89]. - Competition in the automotive aftermarket is intense, with various competitors having greater resources, which could impact the company's market share and revenues [91]. Risks and Compliance - The Company faces risks from global trade tariffs imposed on imports, which could impact product costs, pricing, and overall financial performance [54]. - The Company faces risks from geopolitical instability and natural disasters that could disrupt supply chains and negatively impact sales and profitability [80]. - Approximately 1.7% of the Company's team members are represented by unions, which poses a risk of operational disruption and increased labor costs if strikes or work stoppages occur [64]. - The Company has established policies to maintain the privacy and security of personal information, but a breach could lead to significant operational and reputational damage [65]. - Compliance with stricter data privacy laws, such as the California Consumer Privacy Act, incurs significant costs and increases the Company's liability regarding personal data [69]. - The Company is dependent on suppliers for products that meet safety and quality standards, and any failure in this regard could lead to lost sales and legal risks [75]. - The rapid evolution of cybersecurity threats, including those related to artificial intelligence, heightens the Company's risk exposure [71]. Human Resources and Team Management - The Company’s ability to attract and retain qualified team members is critical for operational success, with potential impacts on customer service and growth opportunities if recruitment efforts fail [63]. - The Company is exposed to credit risk primarily from trade accounts receivable, but the risk is mitigated by a large customer base with small balances [197]. - Foreign currency exchange rate fluctuations did not materially impact net income during fiscal 2025 and fiscal 2024 [198].

Core Viewpoint - Shares of Advance Auto Parts (AAP) have shown volatility but have increased by 30% over the past year, indicating a recovery from prior underperformance [1] Company Performance - The stock has made progress in recouping losses, with a notable 30% increase in share price over the last year [1] Investor Sentiment - Investors received positive news regarding the company's performance, suggesting a favorable outlook for the stock [1]

Core Insights - Advance Auto Parts, Inc. (AAP) reported adjusted earnings of 86 cents per share for Q4 2025, surpassing the Zacks Consensus Estimate of 41 cents, and showing a significant improvement from an adjusted loss of $1.18 per share in the same quarter last year [1][8] Financial Performance - The company generated net revenues of $1.97 billion, exceeding the Zacks Consensus Estimate of $1.95 billion, although it represented a decline from $1.99 billion in the year-ago quarter. Comparable store sales increased by 1.1% year over year, falling short of the expected 3.3% growth [2][8] - Gross profit surged by 150.4% to $869 million, accounting for 44% of net sales. AAP reported operating income of $44 million, a turnaround from an operating loss of $820 million in Q4 2024. Selling, general and administrative (SG&A) expenses decreased by 29.3% year over year to $825 million [3][8] Cash Flow and Debt - As of January 3, 2026, the company had cash and cash equivalents of $3.12 billion, up from $1.87 billion a year earlier. Total long-term debt stood at $3.41 billion [3] - For the fourth quarter of 2025, net cash used by operating activities was $46 million, with negative free cash flow totaling $298 million [4] Store Operations and Future Plans - AAP operated 4,305 stores across the U.S., Canada, Puerto Rico, and the U.S. Virgin Islands, along with 809 independently-owned Carquest-branded stores in these regions and Mexico [4] - For 2026, AAP expects net sales to range between $8.485 billion and $8.575 billion, a decrease from $8.60 billion in 2025. The company plans to open 40-45 new stores and anticipates comparable store sales growth of 1-2%, up from 0.8% in 2025. Adjusted operating income margin is projected to be between 3.8% and 4.5%, compared to 2.5% in 2025, with capital expenditures expected to be around $300 million [6][8] Dividend Declaration - On February 10, 2026, AAP declared a dividend of 25 cents per share, scheduled for payment on April 24, 2026, to shareholders as of April 10, 2026 [5]

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