Stryker shares tumble despite strong Q2 results and raised guidance
On Friday, JPMorgan analyst Christopher Horvers adjusted the price target for Advance Auto Parts (NYSE:AAP) stock, raising it to $44.00 from the previous $41.00 while maintaining a Neutral rating on the company’s shares. Currently trading at $48.67, the stock has surged 38.94% in the past week. The revision comes after Advance Auto Parts reported better-than-expected comparable store sales (SSS) and improved expense efficiency. According to InvestingPro, 10 analysts have recently revised their earnings estimates downward, though the stock’s RSI suggests it’s in overbought territory.
Advance Auto Parts’ SSS showed a smaller decline than anticipated, registering at -0.6% compared to the estimated -2.0%. This performance, coupled with better expense management, resulted in a smaller operating income decline of $8 million versus the expected $50 million. With current revenue of $8.9 billion and a gross margin of 42.05%, the company’s management has expressed confidence in stabilizing the business and correcting past mistakes. They are now focusing on operational improvements across the company. For deeper insights into AAP’s financial health and growth potential, comprehensive analysis is available in the InvestingPro Research Report, part of our coverage of 1,400+ US stocks.
The management team at Advance Auto Parts is working towards a return to positive comparable store sales and aims for a 500 basis point operating margin expansion to 7%. This goal is to be achieved primarily through gross margin improvements, targeting a mid-40s percentage compared to approximately 42% in 2024. Additionally, the company expects to gain some benefit from reductions in selling, general, and administrative expenses (SG&A), targeting a rate below 40%.
Finally, Advance Auto Parts is actively working to mitigate the impact of tariffs, which could potentially enhance margins if the industry maintains rational pricing strategies. To date, the company has experienced minimal price increases due to tariffs. The firm’s efforts are part of a larger strategy to improve sales productivity and overall financial performance.
In other recent news, Advance Auto Parts has reported better-than-expected financial results for the first quarter of 2025, surpassing both revenue and earnings estimates. Analysts from multiple firms have responded to these developments with varied adjustments to their price targets. BMO Capital Markets raised its price target to $50, maintaining an Outperform rating, while BofA Securities increased its target to $39 but kept an Underperform rating. Goldman Sachs set its new target at $48, maintaining a Neutral rating, and Truist Securities raised its target to $51, retaining a Hold rating.
The company’s Professional segment has shown particularly strong performance, contributing to a smaller-than-expected decline in comparable store sales, with an adjusted earnings per share of -$0.22, which was better than the consensus estimate. Advance Auto Parts has also seen improvements in its inventory management and pricing strategies under CEO Shane O’Kelly, which have been positively noted by William Blair analysts. Despite these positive developments, challenges remain, such as a 50 basis point contraction in gross margin and a 180 basis point increase in SG&A expenses, partly due to higher labor costs. Analysts are cautiously optimistic, with some expressing a desire for more consistent performance before adopting a more positive outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.