'Integration Disruptions Becoming Bigger Concern' For Advance Auto Parts

Cleveland Research commented on Advance Auto Parts, Inc. (NYSE: AAP) Wednesday and said that integration disruptions were becoming a bigger concern.

Analysts led by Daryl Boehringer felt that merger-related disruption had lead to a "wider degree of underperformance" and that channel concerns appeared to "be elevating as integration detracts from execution."

Boehringer indicated that the firm's work left the analysts "more cautious on the near-term performance of the company as disruptions associated with the integration of GPI (entering the ‘heavy-lifting' stage) appear to be having a fairly meaningful negative impact on the business."

In the short term, the firm reduced its Q1 2015 comp estimate from 1.9 percent to 1.0 percent versus consensus of 1.4 percent.

Over the longer term, the analysts thought the company had "some compelling growth elements," however, the sentiment was "less bullish on the overall outlook for the company in 2015" and the firm anticipated "the large size and scope of the GPI integration will likely cause disruptions to AAP's business that make an upside earnings scenario less achievable."

The firm also reduced estimated Q1 2015 EPS to $2.47, which was slightly below consensus of $2.50 and represented ~10 percent EPS growth.

FY 2015 estimated EPS was set to $8.49 which is slightly below the consensus of $8.53.

The firm maintained a Neutral rating on Advance Auto Parts, which closed at $143.75 Wednesday, down 3.97 percent.