Advance Auto Parts (AAP) is expected to deliver an in-line fiscal Q2, while tougher compares in H2 will provide a real test of the company's fiscal 2026 outlook, RBC Capital Markets said in a note Wednesday.
The investment firm maintained its 2% Q2 comparable sales estimate, above the 1.4% consensus but down from 3.5% in Q1 as tax refund benefits dwindle and the company laps inflation in the second half of the quarter.
RBC expects Q2 gross margins to expand 150 basis points year over year to 45.3%, driven by product margin improvement, supply chain efficiencies and a lower percentage of national account sales.
The firm raised its Q3 comparable sales estimate to 0.5% from previous outlook of a 1% decline, based on relative industry momentum and potential incremental same SKU inflation related to higher fuel costs.
The firm models Q2 adjusted EPS of $0.80, in line with consensus estimates.
RBC Capital Markets maintained its sector perform rating on Advance Auto Parts and raised its price target to $67 from $65.
Shares of the company were 3.7% higher in Thursday trading.
Price: $55.49, Change: $+1.97, Percent Change: +3.68%