Morgan Stanley lowered its price target on Advance Auto Parts' stock to $185 per share from $205 while maintaining its investment rating on the shares at overweight. Wedbush, meanwhile, cut its price target on the stock to $180 from $200 while keeping its investment rating on the stock at outperform.
Amid the target reductions, shares of Advance Auto Parts slipped 1.2% in recent Wednesday pre-market trading to $140.50.
In a note to clients, Morgan Stanley said the Q2 miss represents "a setback in AAP's ongoing transformation." The firm said the price-target cut "reflects less near-term earnings upside and a modestly lower valuation multiple."
However, the firm also said, "while the pace and magnitude of AAP's transformation has been disappointing (including Q2), we believe this is one of the larger-margin expansion opportunities in retail. AAP also has other attractive characteristics including exposure to a healthy and defensive sector and relative tariff insulation."
Wedbush, meanwhile, said it cut the price target "to reflect less consistent results," but also said "the relative weakness appears transitory, with trends improving to start 3Q19 as the weather has turned favorable and the company has addressed minor operational missteps."
Wedbush noted the guidance cut is "only to reflect the soft 2Q results, with the [second-half] outlook remaining intact." It added: "Most importantly, the long-term relative market share and margin-improvement story remains on track, with progress on key initiatives including integrated replenishment pointing to continued margin improvement in 2020 and even further margin acceleration in 2021."
Advance Auto Parts' Q2 results released Tuesday showed its adjusted earnings per share for the quarter rose to $2.00 from $1.97 a year earlier but missed the Street's consensus estimate according to Capital IQ of $2.21 a share. Net sales rose 0.2% to $2.33 billion, missing analysts' mean estimate of $2.36 billion, as comparable-sales growth came in flat, missing expectations for 1.8% growth.
The company now expects full-year net sales in a range of $9.65 billion to $9.75 billion; its prior guidance range had the same low end, but with a high end of $9.8 billion. The high end of its outlook for comparable-store sales was also cut; the guidance range is now at 1% to 2%, versus the company's prior projection of 1% and 2.5% growth.
Price: 138.00, Change: -4.27, Percent Change: -3.00
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