Shares of Advance Auto Parts Soar 19% After Topping Earnings Estimates

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What happened

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Shares of Advance Auto Parts (NYSE: AAP), a leading automotive aftermarket parts provider focusing on professional and do-it-yourself customers, were up nearly 19% as of 12:07 p.m. EST Tuesday after the company topped Wall Street's profit estimates.

So what

Advance Auto reported total net sales of $2.18 billion for the third quarter, a 3% decline from the prior year and short of analysts' estimates calling for $2.21 billion. But despite falling short on revenue estimates the auto parts retailer generated adjusted earnings of $1.43 per share, which was far better than analysts' consensus estimate of $1.20 per share.

In the press release announcing the results, President and CEO Tom Greco said:

"We continue to take steps to build the foundation for future growth. We executed key transformational initiatives, including a complete restructure of our field operations and professional sales leadership teams. This important step in our journey sets us up well for the future. In the third quarter, we delivered improvements in cost initiatives while positioning the business for future success. We remain on track to deliver our 2017 guidance." 

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Now what

Part of Advance Auto's share price spike Tuesday simply reflects how heavily the stock had been sold off previously. Before that pop, Advance shares had shed just over half their value year to date and, even with today's jump included, are still down roughly 41% on the year. The company still needs to improve margins by optimizing its supply chain and distribution, but the increase in numbers of miles driven and the rising average age of vehicles on the road should help the company grow over the medium term.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.