Why Pep Boys - Manny, Moe & Jack (PBY) Stock Is Falling After-Hours

NEW YORK (TheStreet) -- Pep Boys - Manny, Moe & Jack (PBY) was falling 5.6% to $11.30 in after-hours trading Monday after missing analysts' estimates for earnings and revenue in the fiscal third quarter.

For the fiscal third quarter Pep Boys posted a loss of 6 cents a share, missing analysts' estimate of earnings of 5 cents a share by 11 cents. Revenue fell 6.6% from the year-ago quarter to $495.7million. Analysts surveyed by Thomson Reuters expected revenue of $534.5 million for the quarter.

"On a comparable store basis, customer count, maintenance and repair sales and tire units all grew quarter over quarter," CEO Mike Odell said in a press release. "While retail tire pricing has recently stabilized, prices are still below last year's level, which has and is expected to continue to negatively impact top line sales results through the second quarter of 2014. We are also growing our service footprint, adding 30 Service & Tire Centers during fiscal 2014. These new Service & Tire Centers showcase the welcoming exterior curb appeal and comfortable customer lounge of our new Road Ahead format."

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TheStreet Ratings team rates PEP BOYS-MANNY MOE & JACK as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate PEP BOYS-MANNY MOE & JACK (PBY) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 114.3% when compared to the same quarter one year prior, rising from -$6.76 million to $0.97 million.
  • Net operating cash flow has slightly increased to $31.66 million or 9.99% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.80%.
  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.12 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for PEP BOYS-MANNY MOE & JACK is currently lower than what is desirable, coming in at 28.12%. Regardless of PBY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.19% trails the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Specialty Retail industry and the overall market, PEP BOYS-MANNY MOE & JACK's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: PBY Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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