Credit Suisse Reports on Advance Auto Parts

Credit Suisse commented on Advance Auto Parts AAP in a report released Thursday. In the report, Credit Suisse was mixed in its assessment. Credit Suisse writes, "The bottom line is that we expect AAP's relative EPS growth to slow which may limit the stock's upside potential in the near-term. AAP faces difficult top and bottom line comparisons in upcoming quarters. While that is well known, top-line growth was weaker than expected in Q1 and gross margin expansion for the balance of 2011 may be subdued. That removes two important levers for EPS upside and makes tough comparisons even more difficult. At this stage, the risk to 2011 consensus EPS ($4.64) seems low given expense reduction, but without solid upside to that number, AAP's risk/reward seems balanced in our view. Longer-term, we continue to believe that the AAP has significant EPS power. Darren Jackson and team have successfully repositioned the business for stronger retail and commercial top-line growth which combined with moderating expense growth set the stage for 12% EBIT margins. That margin potential, AAP's strong position in the favorable DIY segment, AAP's strong cash flows and the stock's relatively undemanding valuation (13x 2011 EPS) protects the downside in our view." Credit Suisse currently has a Neutral rating on Advance Auto Parts and a price target of $70. Shares of AAP closed at $62.49 on Wednesday, up from $61.66 at the opening bell.