This AM (09/19/17) AZO reported Q4 2017 results. SSS of 1.0% beat Consensus of 0.8% and further beat our (-1.0%). EPS adjusted (for SBC accounting change) of $15.18 ($15.27 GAAP) beat Consensus of $15.11 and our $14.35. Shares are down ~4-5%.
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KMX is scheduled to report FQ2 17 results on 9/22. We are bumping our Q2 ‘17 comp to 7.0% (was 4.5%), closer to buy-side consensus, which we think is 7-8%. We have CAF income returning to negative growth on the rate hike, presumed lower CAF penetration, and higher provisioning. We are nudging our Q217 EPS to $0.91 (was $0.88).
Auto part retail shares have been selling off, but spookily rebounding despite our investor survey pointing to negative sentiment.
Our thoughts go out to those suffering from the devastating effects of Hurricane Harvey. We’ve attempted the unenviable task of assessing the implications of mass destruction to personal property including vehicles on our coverage universe.
Auto part retailers are down -30 to -40% TTM. To gauge analyst expectations, we surveyed buy side investors to sort out top ideas, relative positioning, and near and long-term expectations for comps and market growth.
This morning (7/26/17), Ford reported Q2 and met on Revenue but Adj. EPS of $0.56 was above consensus of $0.43 and our $0.38 with $0.13 of help from taxes. Revised full-year guidance implied a small cut even at the high-end of the range by our round math (Exhibit 2) as commodity costs, and warranties were cited. Shares were down -2%.
AAP reported Q2 17 results pre-market. SSS were flat, which met Consensus of -0.2% but beat our -1.0%. Adjusted EPS of $1.58 missed Consensus of $1.65 and our $1.63 (Exhibit 6). However, full-year guidance was very light with comp guidance of down to -3% to -1% vs Consensus -0.5% and our -0.9% (after adjusting for Q2 beat). AAP also issued new op margin guidance calling for a -200 to -300bps decline versus Consensus -100bps and our -150bps, which implies further weakness in 2H.
Yesterday (8/9/17), after the market closed, KAR reported Q2 17 results. Total Revenue growth of 8.8% beat Consensus of 7.9% but missed our 9.4%. Adj. Cash EPS of $0.65 was above Consensus of $0.58 and our $0.59. Adjusted EBITDA of $224M beat Consensus of $217M and our $216M. KAR reiterated its full year guidance including Operating EPS of $2.15-$2.25 and Adjusted EBITDA of $825-$850M. Shares gained +8%. See page 3 for our bulleted takeaways from the call.
This morning (8/8/17) LAD announced the acquisition of Downtown LA Auto Group, inclusive of 3 luxury dealerships and 5 import/domestic dealership locations. The expectation is for an additional annualized revenue of $1B, and $0.55 in EPS. Management bumped FY2017 guidance by $0.20 to $8.55-$8.70. The stock first traded up but then ended -1% on the day (against a 1-3% decline for the other public dealers).
This is an amazing management team, but given our views on market consolidation, cyclical and competitive pressures, as well as lapping recent tailwinds, we have difficulty seeing comps returning to historical levels barring some minor lift from weather. Shares were down -1% as we believe investors didn’t get a catalyst on M&A or hints of a reacceleration that some may have been anticipating.
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