Advance Auto Parts Inc. shares tumbled 15.9% in pre-market trading on Thursday after the auto parts retailer reported quarterly results that underscored weaker-than-expected underlying performance despite adjusted earnings beating estimates.
The company posted adjusted diluted earnings per share of $1.03 for the second quarter, exceeding the consensus forecast of around $0.80. However, roughly $0.31 of that figure stemmed from one-time tariff refunds, leaving core operating earnings closer to $0.72 per share—a figure that fell short of analyst expectations once normalized for the temporary benefit. Full-year 2026 guidance was reaffirmed, with management opting against upward revisions.
Citi reduced its price target on Advance Auto Parts to $57 from $60, citing concerns over margin pressure and competitive dynamics. The stock had been trading at roughly 49 times trailing earnings, a significant premium to the sector average of around 20 times, reflecting elevated investor expectations that were not met by the underlying results.
Margin expansion decelerated to approximately 250 basis points year-over-year in the quarter, down from 410 basis points in the first quarter. CEO Shane O'Kelly acknowledged during the earnings call that the company is "navigating a volatile demand environment," signaling caution about near-term trading conditions.
The selloff intensified as investors weighed the implications of potential industry consolidation. Speculation has grown around a possible merger between O'Reilly Automotive and Genuine Parts, which could create a larger rival with enhanced purchasing power and potential pressure on supplier terms and market share for Advance Auto Parts.
