Analysts Call Advance Auto CEO 'The Right Executive For The Job'

There is now increased clarity related to the turnaround plan at Advance Auto Parts, Inc. (NYSE: AAP), Argus’ Chris Graja said in a report. He reiterated a Buy rating for the company, while reducing the price target from $200 to $185.

Thoughts Around New CEO

Advance Auto’s new CEO Tom Greco has experience of 30 years with PepsiCo, Inc. (NYSE: PEP). Mr. Greco would apply this expertise to “making AAP a more efficient and more customer-focused company,” analyst Chris Graja wrote.

Although Advance Auto has been witnessing headwinds related mainly to the General Parts integration, Mr. Greco rightly believes that the company has the ability to fix its operating problems and generate significant shareholder value, Graja commented.

The turnaround is unlikely to happen overnight, but there is likely to be a series of “small victories” over the next year, “with a strong focus on product availability and in-stock levels.” The analyst expressed confidence in Mr. Greco being “the right executive for the job” and being able to deliver “operating improvements that will be catalysts for the shares.”

The price target has been reduced to reflect lower EPS estimates. The adjusted EPS estimates for 2016 and 2017 have been reduced from $9.00 to $7.85 and from $10.05 to $8.80, respectively.