We undertook the unenviable task of reading the proxy for every company under coverage (and one we don’t cover: TSLA).
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Using Return on Invested Capital as a lens, we take a look at which companies and sub-industries capture the highest returns within the automotive value chain. We calculate ROIC across 27 companies within industries including dealers, OEMs, parts suppliers, aftermarket retailers, and service providers.
In the AM AAP reported Q1 results with SSS of -0.8% vs Cons of +0.3%/ our -0.5%. Adj. EPS of $2.10 beat Cons. of $1.97/our $1.90 as op margins of 7.8% beat Cons of 7.3%/our 6.7%. However, 50% of the SG&A improvement in Q1 was from deferred investment, which we estimate helped op margins by ~40bps and EPS by $0.12 as cost take-outs help to offset wage/transportation pressures. AAP -2% but peers -3% to -9% and S&P flat.
Yesterday (5/9/2018), Sears (not covered) announced a partnership with Amazon (c/b S. Mushkin) to sell and install any brand of tire at Sears’ 400+ Auto Center locations. In Feb. 2018, Amazon began carrying Die Hard starters, chargers, and Gold AGM batteries (expensive). Stock reaction was mixed with the group only modestly trailing (+0.5%) the S&P 500 (+1.0%).
Today (04/02/18), after market hours, AAP announced that EVP & CFO Tom Okray has decided to leave the company, effective 04/05/18 to take a position as CFO at GWW (Not covered). Controller/ CAO Jeff Shepherd will serve as interim CFO while an outside search is conducted.
Advance reported Q4 results and 2018 guidance this morning (2/21/2018). Same-store sales declined -2.6%, which was better than consensus expectations for -3.8% decline and our -4.0%. At $0.77, adjusted earnings per share also exceeded expectations, coming in $0.13 and $0.11 higher than consensus and our estimates, respectively.
This morning (02/06/18) ABG reported Q4 2017 results. New and Used Unit comps were +0.9% and -8.9%, respectively. Total Revenue growth of +0.3% missed consensus of +1.1% but beat our -2.2%. New and Used SSS $GP/Unit were both down, but less than last quarter, at -3.4% and -1.5%; however, F&I per unit was up +9.8% (or 6.5% adjusted). Adj. EPS of $1.81 beat Cons. of $1.59 and our $1.57. Shares were up +3% on the day.
Most of you cover 50 – 200 stocks and therefore don’t have the liberty of being as into the weeds on every name – that’s our job. To help you do yours, we have created a comprehensive, but chart-heavy, guide to our coverage that is meant to have shelf life and that can be referred back to when you are ready to dig more into our coverage.
Auto part retailers were down -30 to -42% through August but are up +17 to 47% since. To gauge current analyst expectations, we surveyed buy side investors to sort out top ideas, relative positioning, and near-term expectations for comps. We also tackled contentious topics including weather, the impact of the 09-11 SAAR air pocket, AAP margin trajectory, tax reform, and valuation methodology.
The tax overhaul is adding a lot of complexity to fundamentals as investors and companies we speak with struggle to digest consensus expectations and current valuation metrics. We sifted through both Factset and Bloomberg estimates to calculate a bottoms-up consensus of ONLY analysts that have revised estimates on tax reform.
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