This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Pep Boys No Longer Leaking Oil, But Stock's Expensive

NEW YORK (TheStreet) -- The last time we discussed the state of retailer/auto services giant Pep Boys (PEP), I raised concerns about what appeared to be leaks in the company's operating model.

Although management had made decent operational progress, the company was still struggling with same-store sales (comps), while margins were compressing. Pep Boys had no answer to the moves made by much nimbler rivals such as Advance Auto Parts (AAP) and AutoZone (AZO). Making matters worse was the fact that Wal-Mart (WMT) was beginning to encroach on both Pep Boys' merchandise business and its services revenue.

Today, however, after a solid fourth-quarter earnings report (in April) Pep Boys has an extra "pep in its step." Since the April release, the stock has been up by as much as 8%. With the company due to report fiscal first-quarter earnings on Tuesday, investors are looking for more gains. But the stock is not cheap -- not at a P/E of 53, which is more than 3-times that of Auto Zone and Advance Auto Parts.

Average estimates predicts revenue of $532.8 million, which would represents growth of just 1.6%. This projection seems conservative to me, though, especially since the company is coming off a strong quarter where revenue grew better than 5%.

While it's true there are still concerns regarding the impact of payroll tax increases and the slow payments in income tax refunds, which has cause consumers to postpone vehicle repairs, I don't believe that this reason can be used indefinitely.

Besides, although Advance Auto Parts and Auto Zone just posted unassuming relative results, their sales figures, which includes revenue growth of 3% and 4.5%, respectively, suggests a better-than-expected start to the spring selling season.


Accordingly, I would expect Pep Boys to post sales results that beat Street estimates by at least 1.5% ($540.8 million). On the bottom line, however, the Street is looking for 9 cents per share in earnings, or year-over-year growth of 125%. That number seems aggressive, especially since Pep Boys missed EPS estimates last year by 6 cents.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,912.11 -70.48 -0.42%
S&P 500 1,969.95 -8.96 -0.45%
NASDAQ 4,442.6980 -2.2110 -0.05%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs