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.
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