What Happened?

Shares of auto parts and accessories retailer Advance Auto Parts (NYSE:AAP) fell 14.4% in the afternoon session after the company reported weak fourth-quarter results: its revenue guidance for the full year was only in line with analysts' expectations. Meanwhile, Advance Auto Parts gave an upbeat earnings forecast for the year, topping analysts' estimates. 

For the quarter, both sales and earnings came in stronger than expected. The company still faces challenges, such as store closures and supply chain changes, which put pressure on profit margins. Overall, this quarter was solid in some aspects, particularly on the earnings front, but the market seems to be focused on the negatives.

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What The Market Is Telling Us

Advance Auto Parts’s shares are very volatile and have had 22 moves greater than 5% over the last year. But moves this big are rare even for Advance Auto Parts and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 6 months ago when the stock dropped 23.2% on the news that the company reported weak second-quarter 2024 earnings results. Its full-year revenue guidance was lowered, which is never a good sign. Adding to the pain was that the company's full-year earnings forecast missed analysts' expectations. 

Overall, this quarter was mediocre. Separately, the company announced the sale of Worldpac (automotive parts wholesale distribution business) to investment firm Carlyle, for $1.5 billion in cash. The Worldpac business drove approximately $2.1 billion in revenue and $100 million in EBITDA over the trailing twelve months before the sale was announced. The proceeds from the sale are expected to buffer the company's balance sheet as it streamlines its operations.

Advance Auto Parts is down 19.7% since the beginning of the year, and at $38.64 per share, it is trading 55.3% below its 52-week high of $86.45 from March 2024. Investors who bought $1,000 worth of Advance Auto Parts’s shares 5 years ago would now be looking at an investment worth $287.20.

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