Advance Auto Parts' Restructuring Plan Boosts Investor Confidence
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 03 2026
0mins
Should l Buy AAP?
Source: NASDAQ.COM
Advance Auto Parts (AAP) shares surged 5.2% this morning, reaching a 20-day high, reflecting market recognition of its deep value opportunity, with a year-to-date increase of over 28%. The company's comprehensive restructuring plan, led by CEO Shane O'Kelly, has closed over 700 locations and opened new stores in key areas, aimed at enhancing operational efficiency and profit margins. Additionally, the launch of a loyalty program for DIY customers is expected to boost customer loyalty and optimize inventory management, addressing long-standing challenges faced by auto parts retailers.
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Analyst Views on AAP
Wall Street analysts forecast AAP stock price to fall
12 Analyst Rating
1 Buy
10 Hold
1 Sell
Hold
Current: 55.930
Low
40.00
Averages
51.55
High
65.00
Current: 55.930
Low
40.00
Averages
51.55
High
65.00
About AAP
Advance Auto Parts, Inc. is an automotive aftermarket parts provider in North America, serving both professional installers (professional) and do-it-yourself (DIY) customers, as well as independently owned operators. The Company's stores and branches offer a range selection of brand names, original equipment manufacturer (OEM) and owned brand automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy-duty trucks. The Company operates approximately 4,788 stores primarily within the United States (U.S.), with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. The Company also serves approximately 934 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands. Its stores operate primarily under the Advance Auto Parts and Carquest trade names.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Advance Auto Parts Stock Dips Post Earnings Report
- Financial Improvement: Advance Auto Parts reported fourth-quarter sales of $1.97 billion, a slight decline from the previous year, yet comparable-store sales increased by 1.1%, marking the third consecutive quarter of improvement, with 2026 sales guidance set between $8.485 billion and $8.575 billion, reflecting a growth of 1% to 2%.
- Rising Car Prices Benefit Parts Sales: The average new car price in the U.S. reached $50,326, pushing used car prices up to $26,043, which encourages consumers to retain their vehicles longer, leading to increased repair needs and consequently boosting auto parts sales.
- Competitive Pricing Advantage: Advance Auto Parts maintains a lower forward P/E and P/S ratio compared to most competitors, indicating that its stock remains undervalued, allowing investors to be patient during the company's recovery while enjoying a reliable dividend yield of approximately 1.7%, consistently paid since 2006.
- Strategic Store Closures: The company closed over 500 corporate stores and 200 independent locations in 2025, saving around $70 million in annual operating costs, and plans to open 40 to 45 new stores in 2026, with 10 to 15 being high-margin hub locations.
See More
Three Unexpected Earnings Surprises May Indicate a New Trend
Earnings Season Overview: More than 74% of S&P 500 companies reporting so far have exceeded analysts' EPS estimates, while 73% have surpassed revenue expectations, indicating a generally positive earnings season despite flat aggregate growth rates.
Applied Materials Performance: Applied Materials (AMAT) has shown strong results, with shares rising 12% after reporting fiscal Q1 2026 results that beat expectations by 7%, driven by robust guidance and equipment demand.
Rivian's Challenges: Rivian Automotive (RIVN) faced a 25% decline in year-over-year revenue growth due to the expiration of EV tax credits, although sales figures still exceeded expectations, and the company narrowed its losses.
Market Recommendations: Analysts have identified five stocks that they recommend buying now, suggesting these companies are well-positioned for future growth despite broader market trends.
See More
Advance Auto Parts Reports Strong Q4 Earnings Exceeding Expectations
- Earnings Beat: Advance Auto Parts reported adjusted earnings per share of $0.86 for Q4, significantly surpassing the analyst consensus estimate of $0.42, indicating strong operational performance and boosting investor confidence.
- Sales Growth: The company achieved quarterly sales of $1.973 billion, exceeding the Street's expectation of $1.952 billion, demonstrating robust sales momentum in the competitive auto parts market.
- Future Guidance: Advance Auto expects fiscal 2026 adjusted earnings per share to range from $2.40 to $3.10, which, while below the analysts' estimate of $2.66, still reflects confidence in its future profitability.
- Analyst Rating Changes: Following the earnings announcement, several analysts adjusted their price targets for Advance Auto Parts, with BMO raising its target from $55 to $60 and RBC increasing its target from $57 to $63, indicating a positive outlook on the company's prospects.
See More
Advance Auto Parts Margins Stabilizing
- Margins Stabilizing: Advance Auto Parts is seeing stabilization in its margins, even though visibility on achieving a 7% operating margin remains limited, indicating some progress in improving financial health.
- Market Response: Despite challenges, the market response to Advance Auto Parts has been relatively positive, with investors cautiously optimistic about its future profitability, which may influence stock performance.
- Operational Efficiency Improvements: The company is implementing measures to enhance operational efficiency to address market competition and cost pressures, thereby laying the groundwork for achieving higher margins.
- Strategic Adjustments: Advance Auto Parts may need to make strategic adjustments to adapt to the changing market environment, ensuring it can meet higher profitability targets in the future.
See More
Advance Auto Parts Q4 2025 Earnings Call Insights
- Sales Recovery: Advance Auto Parts reported a 1.1% increase in comparable sales for Q4 after three years of declines, indicating initial success in its sales strategy transformation, with expectations for 2026 comparable sales growth accelerating to the 1% to 2% range, reflecting a gradual recovery in market demand.
- Operating Margin Improvement: The adjusted operating income margin expanded by over 200 basis points from near breakeven levels, reaching 2.5% at the end of 2025, with plans to further increase it to a range of 3.8% to 4.5% in 2026, significantly enhancing the company's profitability and investment appeal.
- Strategic Restructuring Measures: The company plans to close over 500 underperforming stores and add 100,000 new SKUs to enhance product variety and availability, which is expected to optimize operational efficiency and improve customer experience, thereby driving future sales growth.
- Cash Flow Outlook: Despite a negative free cash flow of $298 million in 2025, the company anticipates a return to approximately $100 million in 2026, reflecting efforts in cost optimization and operational efficiency, which bolsters investor confidence in future financial health.
See More
U.S. Stocks Decline in Morning Trade as Inflation Rate Eases
- Market Performance: U.S. stocks traded lower this morning, with the Dow Jones index falling approximately 0.1% to 49,387.55, indicating a cautious market sentiment regarding economic outlook.
- Sector Dynamics: Utility stocks gained 1.5%, while communication services stocks fell by 0.6%, reflecting a divergence in market performance across sectors that could influence investors' asset allocation strategies.
- Earnings Highlights: Advance Auto Parts (NYSE:AAP) reported better-than-expected fourth-quarter results, with earnings per share of $0.86 surpassing the analyst consensus of $0.42, and sales reaching $1.973 billion, demonstrating the company's strong performance in a competitive market.
- Economic Data: The annual inflation rate eased to 2.4% in January, the lowest level since May, down from 2.7% in the previous month, which may impact the Federal Reserve's monetary policy decisions.
See More
Advance Auto Parts Stock Dips Post Earnings Report
- Financial Improvement: Advance Auto Parts reported fourth-quarter sales of $1.97 billion, a slight decline from the previous year, yet comparable-store sales increased by 1.1%, marking the third consecutive quarter of improvement, with 2026 sales guidance set between $8.485 billion and $8.575 billion, reflecting a growth of 1% to 2%.
- Rising Car Prices Benefit Parts Sales: The average new car price in the U.S. reached $50,326, pushing used car prices up to $26,043, which encourages consumers to retain their vehicles longer, leading to increased repair needs and consequently boosting auto parts sales.
- Competitive Pricing Advantage: Advance Auto Parts maintains a lower forward P/E and P/S ratio compared to most competitors, indicating that its stock remains undervalued, allowing investors to be patient during the company's recovery while enjoying a reliable dividend yield of approximately 1.7%, consistently paid since 2006.
- Strategic Store Closures: The company closed over 500 corporate stores and 200 independent locations in 2025, saving around $70 million in annual operating costs, and plans to open 40 to 45 new stores in 2026, with 10 to 15 being high-margin hub locations.
See More
Three Unexpected Earnings Surprises May Indicate a New Trend
Earnings Season Overview: More than 74% of S&P 500 companies reporting so far have exceeded analysts' EPS estimates, while 73% have surpassed revenue expectations, indicating a generally positive earnings season despite flat aggregate growth rates.
Applied Materials Performance: Applied Materials (AMAT) has shown strong results, with shares rising 12% after reporting fiscal Q1 2026 results that beat expectations by 7%, driven by robust guidance and equipment demand.
Rivian's Challenges: Rivian Automotive (RIVN) faced a 25% decline in year-over-year revenue growth due to the expiration of EV tax credits, although sales figures still exceeded expectations, and the company narrowed its losses.
Market Recommendations: Analysts have identified five stocks that they recommend buying now, suggesting these companies are well-positioned for future growth despite broader market trends.
See More
Advance Auto Parts Reports Strong Q4 Earnings Exceeding Expectations
- Earnings Beat: Advance Auto Parts reported adjusted earnings per share of $0.86 for Q4, significantly surpassing the analyst consensus estimate of $0.42, indicating strong operational performance and boosting investor confidence.
- Sales Growth: The company achieved quarterly sales of $1.973 billion, exceeding the Street's expectation of $1.952 billion, demonstrating robust sales momentum in the competitive auto parts market.
- Future Guidance: Advance Auto expects fiscal 2026 adjusted earnings per share to range from $2.40 to $3.10, which, while below the analysts' estimate of $2.66, still reflects confidence in its future profitability.
- Analyst Rating Changes: Following the earnings announcement, several analysts adjusted their price targets for Advance Auto Parts, with BMO raising its target from $55 to $60 and RBC increasing its target from $57 to $63, indicating a positive outlook on the company's prospects.
See More
Advance Auto Parts Margins Stabilizing
- Margins Stabilizing: Advance Auto Parts is seeing stabilization in its margins, even though visibility on achieving a 7% operating margin remains limited, indicating some progress in improving financial health.
- Market Response: Despite challenges, the market response to Advance Auto Parts has been relatively positive, with investors cautiously optimistic about its future profitability, which may influence stock performance.
- Operational Efficiency Improvements: The company is implementing measures to enhance operational efficiency to address market competition and cost pressures, thereby laying the groundwork for achieving higher margins.
- Strategic Adjustments: Advance Auto Parts may need to make strategic adjustments to adapt to the changing market environment, ensuring it can meet higher profitability targets in the future.
See More
Advance Auto Parts Q4 2025 Earnings Call Insights
- Sales Recovery: Advance Auto Parts reported a 1.1% increase in comparable sales for Q4 after three years of declines, indicating initial success in its sales strategy transformation, with expectations for 2026 comparable sales growth accelerating to the 1% to 2% range, reflecting a gradual recovery in market demand.
- Operating Margin Improvement: The adjusted operating income margin expanded by over 200 basis points from near breakeven levels, reaching 2.5% at the end of 2025, with plans to further increase it to a range of 3.8% to 4.5% in 2026, significantly enhancing the company's profitability and investment appeal.
- Strategic Restructuring Measures: The company plans to close over 500 underperforming stores and add 100,000 new SKUs to enhance product variety and availability, which is expected to optimize operational efficiency and improve customer experience, thereby driving future sales growth.
- Cash Flow Outlook: Despite a negative free cash flow of $298 million in 2025, the company anticipates a return to approximately $100 million in 2026, reflecting efforts in cost optimization and operational efficiency, which bolsters investor confidence in future financial health.
See More
U.S. Stocks Decline in Morning Trade as Inflation Rate Eases
- Market Performance: U.S. stocks traded lower this morning, with the Dow Jones index falling approximately 0.1% to 49,387.55, indicating a cautious market sentiment regarding economic outlook.
- Sector Dynamics: Utility stocks gained 1.5%, while communication services stocks fell by 0.6%, reflecting a divergence in market performance across sectors that could influence investors' asset allocation strategies.
- Earnings Highlights: Advance Auto Parts (NYSE:AAP) reported better-than-expected fourth-quarter results, with earnings per share of $0.86 surpassing the analyst consensus of $0.42, and sales reaching $1.973 billion, demonstrating the company's strong performance in a competitive market.
- Economic Data: The annual inflation rate eased to 2.4% in January, the lowest level since May, down from 2.7% in the previous month, which may impact the Federal Reserve's monetary policy decisions.
See More
