Is There a Reason to Be Optimistic about Advanced Auto Parts, Inc. (AAP)?

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On Jan. 29, the closing bell saw Advanced Auto Parts, Inc. (NYSE:AAP) shares drop to $74.57, a -1.80% change of $1.37. It ranged from a low of $74.49 to a high of $75.83 for that day, while the past 52 weeks saw it trade at a high point of $93.08 to a low of $60.87. In the third quarter of 2012, AAP lost its footing, with earnings per share falling by 14.2% to $1.21 mainly due to weakened sales in some major markets.

However, Advance Auto’s EPS did meet Zacks’ estimates for that particular quarter. The company’s income dropped heavily, from $105.6 million to $89.5, a 15.2% decline. Nevertheless, the beginning of 2013 saw AAP report its acquisition of BWP Distributors via a cash transaction, which could help the company in expanding sales and profit generation in the northwestern part of the US. This means that the operation of 124 BWP stores will be utilized in helping reposition itself in the auto retail market.

O'Reilly Automotive Inc (NASDAQ:ORLY)Ups and Downs

Near the end of 2008 all the way to April 2012, Advanced Auto Parts’ share price grew by an impressive 262%, with auto manufacturing sales lagging behind in the same period. Recent months, however, showed a paradigm shift with the latter overtaking auto retailers due to some improvement in the job market and the comparative strength in general purchasing power. What this meant was that the obstacles to purchasing new vehicles were easier to surmount, and that consumers were in a better position to replace their clunkers with vehicles fresh out of the showroom. Since April 2012, shares of Advanced Auto Parts slid a hefty 21%, while fellow retailers O’Reilly Automotive Inc (NASDAQ:ORLY) and AutoZone, Inc. (NYSE:AZO) dropped by 17% and 13%, respectively, although these two companies experienced growths of 345% and 380%, respectively, when the market was booming.

O’ Reilly Automotive has reported fourth quarter earnings for 2012 this Feb. 7, with analysts expecting a larger EPS of $1.08 from $0.93 only one year ago. For this year, EPS is pegged at $4.69, with revenue for the annum a potential $6.17 billion. It is rated by 62.2% of analysts as a stock to buy, with the automotive aftermarket retailer and supplier being in stiff competition with Autozone and Advance Auto.

Rival auto accessories seller Autozone, on the other hand, may seem an iffy buy if you consider PEG, but it has returned more than 20% per year, with 2013 forecasted to grow a steady 17%; slightly on the modest side. EPS grew despite and throughout the recession, although growth potential may be a tad on the mediocre side due to the slew of – count ‘em – 5,000 sales locations, which may generate sluggish stocks and not too much in the way of additional stock value and profits for traders.

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