What Happened:
Shares of auto parts and accessories retailer Advance Auto Parts (NYSE:AAP) jumped 6.18% in the afternoon session after the company reported second quarter results that exceeded analysts' revenue expectations.
On the other hand, earnings per share came in below expectations, driven by the company's "inability to price to cover inflation." Moving ahead, the company lowered the full year EPS guidance. Similarly, the free cash flow guidance for the full year was lowered. However, it raised its full-year revenue guidance and same-store sales growth expectations, adding that "We began to see early signs that the strategic investments we are making are beginning to drive an improvement in topline sales and transactions. This is evidenced by positive comparable store sales growth in the final four weeks of the second quarter, which has continued into the third quarter."
Overall, the results could've been better, but the market was likely looking for growth (and Advance Auto Parts delivered on that front).
After the initial pop the shares cooled down to $69.95, up 3.86% from previous close.
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What is the market telling us:
Advance Auto Parts's shares are not very volatile than the market average and over the last year have had only 8 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
Advance Auto Parts is down 54% since the beginning of the year, and at $69.95 per share it is trading 64.9% below its 52-week high of $199.05 from August 2022. Investors who bought $1,000 worth of Advance Auto Parts's shares 5 years ago would now be looking at an investment worth $427.36.
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