Last fall, the market pummeled Advance Automotive (AAP) to the $90's (Personally, I wouldn’t mind going back to the 1990’s). The market is well-known for its impatience. I used that drop to discuss how much securities can vary in a short period of time. Those moments are the "bread and butter" for patient investors.
Today, the news reported their earnings and revenues. They beat analyst estimates. That said, the news reported the fabricated "adjusted" numbers. Now, I don't pay very much attention to those concoctions of non-GAAP numbers because they have no standards associated with them. Pure BS. Nonetheless, their GAAP numbers looked great.
One thing that is hard to fudge in financial reporting without overtly cheating the rules of reporting is sales. Their QtoQ sales increased 2.8%. Not spectacular, but steady. Their 28 week sales increased .9% which means their sales are picking up momentum. Same store sales also increased 2.8%. Nice. While lots of folks want to see rocket shot numbers, I like the consistent, steady sales. Different strokes, different folks. It keeps them from “burning up” with too much fuel.
Diluted earnings (GAAP) QtoQ went from 1.17 to 1.59. That is a 36% increase in per share profit. For 28 weeks, their per-share profit increased 30%. I'll take that.
Cash flow from operations increased from 267M to 443M. Their cash went from 547M to 902M. Their cash is now not far from covering their LTD of 1,045M.
Now the bad. Remember “There is no free lunch!”
Their long term debt load did not decrease. At this point in the economy, I like to see leverage being reduced. It mitigates potential risk.
They have been light on their CapEx, but if they are focused on paying down some of the debt that would be great.
It would also be nice if their dividend increased. It has been flat for years!
I can only hope with the buildup in cash that they are looking to reduce their debt load and they aren't wrapped up in M&A thinking. Wall Street just loves to talk in CEO's ears about acquisitions. Prices are really high now for M&A. Considering that their last acquisition took SEVERAL years to digest, there IS no golden goose. Please don't............!
