Free Annual Reports
Pep Boys Fails To Impress (PBY, AZO, AAP, ORLY, PRTS)
The Pep Boys (NYSE: PBY) turned in modest gains in its first quarter earnings report last week. Both revenue and net income were up slightly, but the Street greeted the news by knocking the stock down 12 percent.
IN PICTURES: 20 Tools For Building Up Your Portfolio
A Modest Quarter
Pep Boys increased its net income from $10.9 million in Q1 2010 to $11.95 million, or 23 cents per share, up from 21 cents. Revenue increased to $510 million from $496 million. Comparable sales were up 1.4 percent, with increases in both merchandise and service or repairs. Merchandise is approximately 80 percent of Pep Boys' revenue, with service the other 20 percent. The market obviously didn't care for the Pep Boys' results.
Why Pep Boys Doesn't Excite The Market
Pep Boys' stock is languishing just below the lower half of its 52-week range, $7.76 to $13.42, trading at $9.49 a share. The market has regarded the company's performance as mediocre, with a poor fiscal 2009, which saw EPS of minus 59 cents. The company has been attempting to become more efficient, and it had a profitable 2010 with a positive EPS of 44 cents. The market doesn't look convinced the progress is that resounding with the small improvements in fiscal 2011's Q1 just ended. But the real story is Pep Boys' competitors.
Lagging The Field
While Pep Boys is on a positive track, it must feel it's getting snubbed by the market and lapped by the field. It has hopes for accelerating its earnings, as analyst expectations project a 53 cents per share year for fiscal 2011 with a 77 cents-a-share EPS for 2012. (Learn about analyst recommendations, see: Analyst Recommendations: Do Sell Ratings Exist?)
Pep Boys' competition, notably AutoZone (NYSE: AZO) and Advance Auto Parts (NYSE: AAP), though, are ringing up better numbers. Auto Zone recently reported a tremendous Q3 with same-store sales up 7.1 percent while earnings shot up 31.5 percent.
Auto Zone's sustained business performance, scale and consistency mark it as the clear leader in the group. Advance Auto Parts is also performing well and is in the midst of executing its plan to further improve. Both Auto Zone and Advance Auto Parts have the advantages of greater scale than Pep Boys and have capitalized on that. Their stocks, and that of O'Reilly Automotive (Nasdaq: ORLY), have been tremendous performers, while Pep Boys has not. A smaller competitor, U.S. Auto Parts Network (Nasdaq: PRTS), has struggled in the last couple of years, not unlike Pep Boys. The pressure exerted by the three stronger competitors - Auto Zone, Advance Auto Parts and O'Reilly Automotive - can be felt by Pep Boys and any others lagging in the space.
Pep Boys' Future
Pep Boys will have to find a way to do better than it's currently doing against its larger, formidable competitors. While the auto repair parts and service space is a lucrative field, there may be further consolidation. Pep Boys and the others compete with local repair chains as well as other national franchised shops. Pep Boys needs to play up its dual strengths of providing both merchandise and service. Pep Boys has always found a niche historically, and it needs to reinforce that before the tide of its rivals washes over it.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 20 Tools For Building Up Your Portfolio
A Modest Quarter
Pep Boys increased its net income from $10.9 million in Q1 2010 to $11.95 million, or 23 cents per share, up from 21 cents. Revenue increased to $510 million from $496 million. Comparable sales were up 1.4 percent, with increases in both merchandise and service or repairs. Merchandise is approximately 80 percent of Pep Boys' revenue, with service the other 20 percent. The market obviously didn't care for the Pep Boys' results.
Why Pep Boys Doesn't Excite The Market
Pep Boys' stock is languishing just below the lower half of its 52-week range, $7.76 to $13.42, trading at $9.49 a share. The market has regarded the company's performance as mediocre, with a poor fiscal 2009, which saw EPS of minus 59 cents. The company has been attempting to become more efficient, and it had a profitable 2010 with a positive EPS of 44 cents. The market doesn't look convinced the progress is that resounding with the small improvements in fiscal 2011's Q1 just ended. But the real story is Pep Boys' competitors.
Lagging The Field
While Pep Boys is on a positive track, it must feel it's getting snubbed by the market and lapped by the field. It has hopes for accelerating its earnings, as analyst expectations project a 53 cents per share year for fiscal 2011 with a 77 cents-a-share EPS for 2012. (Learn about analyst recommendations, see: Analyst Recommendations: Do Sell Ratings Exist?)
Auto Zone's sustained business performance, scale and consistency mark it as the clear leader in the group. Advance Auto Parts is also performing well and is in the midst of executing its plan to further improve. Both Auto Zone and Advance Auto Parts have the advantages of greater scale than Pep Boys and have capitalized on that. Their stocks, and that of O'Reilly Automotive (Nasdaq: ORLY), have been tremendous performers, while Pep Boys has not. A smaller competitor, U.S. Auto Parts Network (Nasdaq: PRTS), has struggled in the last couple of years, not unlike Pep Boys. The pressure exerted by the three stronger competitors - Auto Zone, Advance Auto Parts and O'Reilly Automotive - can be felt by Pep Boys and any others lagging in the space.
Pep Boys' Future
Pep Boys will have to find a way to do better than it's currently doing against its larger, formidable competitors. While the auto repair parts and service space is a lucrative field, there may be further consolidation. Pep Boys and the others compete with local repair chains as well as other national franchised shops. Pep Boys needs to play up its dual strengths of providing both merchandise and service. Pep Boys has always found a niche historically, and it needs to reinforce that before the tide of its rivals washes over it.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Free Annual Reports
