Advance Auto Parts Still Has Long Way to Go; No 'Urgency' to Take Action on Stock, UBS Says

03:52 PM EDT, 08/23/2024 (MT Newswires) -- Advance Auto Parts (AAP) still has a long way to go and there is no immediate need to take action on the aftermarket car-parts retailer's stock, UBS Securities said in a note emailed Friday.

Following the company's fiscal Q2, "the overall takeaway was that the road ahead for the company is long. We don't see a sense of urgency to get involved in the stock," UBS analysts said, adding that "If this transformation works, the evidence probably won't

materialize in a meaningful way until 2025 at the earliest."

The company said Thursday it has agreed to sell its automotive parts wholesale distribution business Worldpac to funds managed by Carlyle Group (CG) for $1.5 billion in cash and reduced its fiscal 2024 per-share earnings guidance to a range of $2 to $2.50 from $3.75 to $4.25 previously.

UBS revised its fiscal 2024 outlook on the company to earnings of $2.25 per share on revenue of $11.21 billion from its previous forecast of $3.25 and $11.20 billion, respectively.

The sale of Worldpac is expected to close before 2024 ends. Net proceeds from the sale will be mainly used to strengthen the balance sheet and invest in the core business, the company said.

UBS maintained a neutral rating on Advance Auto Parts and cut its price target to $56 from $64.

The company's shares were down 4.4% in recent Friday trading.

Price: 48.94, Change: -2.16, Percent Change: -4.23