Why Advance Auto Parts (AAP) Stock Is Trading Lower

Advance Auto Parts, Inc. AAP shares are trading lower by 5.3% to $39.20 during Monday’s session. Shares of auto supplier stocks may be under pressure following weak guidance from Stellantis, which could be causing concern for the sector.

What Happened: Shares of Advance Auto Parts fell sharply Monday, following the announcement from Stellantis NV STLA that the global automaker revised its fiscal 2024 guidance.

The Stellantis report, which sent shockwaves across the auto sector, also led to declines in other major automakers like General Motors Co GM and Ford Motor Co F, with market concerns growing over weakened auto sales, supply chain constraints, and profitability.

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Stellantis, the parent company of brands like Chrysler, Dodge and Jeep, cut its adjusted operating margin expectations to a range of 5.5%-7.0%, down from its prior double-digit growth targets. The company also projected negative industrial free cash flow for fiscal 2024, between -€5 billion to -€10 billion, a stark contrast to previous expectations of positive cash flow.

These financial adjustments are attributed to substantial shipment declines in North America, increased incentives on aging vehicle inventories, and overall deterioration in global market conditions, which many analysts believe could signal broader challenges for the automotive and aftermarket parts industries.

What Else: Advance Auto Parts, a leading provider of aftermarket automotive parts, is particularly sensitive to fluctuations in the broader automotive sector. While the company primarily caters to the DIY market and professional repair shops, any slowdown in new car sales and production impacts the demand for aftermarket parts.

Stellantis' announcement of declining shipments — now expected to reduce by over 200,000 vehicles in the second half of 2024 — suggests fewer cars on the road and in need of parts over the near term.

Additionally, the increased incentives to push older model-year vehicles could mean reduced profitability for automakers, which often translates into leaner inventory and less need for replenishment in parts.

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Is AAP A Good Stock To Buy?

An investor can make a few decisions when deciding whether a stock is a good buy. In addition to valuation metrics and price action which you can find on Benzinga's quote pages – like Advance Auto Parts‘s page for example – there are factors like whether or not a company pays a dividend or buys a large portion of its stock each quarter.

These are known as capital allocation programs. Advance Auto Parts does pay a dividend, which yields 1.64% per year as of the closing price on Sep. 30, 2024. Feel free to search Benzinga's dividend calendar for the next company that is due to pay a dividend and determine what kind of yield you can earn for holding a share of the company.

For example, if you're looking to earn an annualized return of 8.89%, you'll need to buy a share of Allspring Inc Opps by the Oct. 15, 2024. Once done, you can expect to receive a nominal payout of $0.05 on Nov. 1, 2024.

Buyback programs are obviously different and highly variable. A company can approve a buyback program and purchase shares as it sees fit over the course of time in which the buyback was authorized. Looking through the latest news on Advance Auto Parts will often yield whether or not the company has approved a buyback program recently. Buyback programs usually serve as a support for share prices, serving as a backstop for demand.

According to data from Benzinga Pro, AAP has a 52-week high of $88.56 and a 52-week low of $37.51.