Advance Auto Parts Inc (NYSE:AAP) reported financial results for the fourth quarter and full year of 2025, delivering a significant earnings beat against analyst expectations. The company's latest figures, released on February 13, 2026, show a business in the midst of a substantial turnaround, with profitability metrics improving dramatically year-over-year. The market reaction in pre-market trading was strongly positive, with shares rising approximately 7.7%, indicating investor approval of the reported progress and the forward guidance provided.
Earnings and Revenue Versus Estimates
The automotive aftermarket retailer's fourth-quarter performance notably exceeded Wall Street's forecasts on the bottom line, while sales came in roughly as expected.
- Earnings Per Share (Adjusted): The company reported adjusted diluted earnings per share of $0.86 for Q4 2025. This result substantially surpassed the analyst consensus estimate of $0.42.
- Net Sales: Quarterly net sales totaled $1.97 billion, essentially matching the analyst estimate of $1.97 billion. It is important to note that the quarter contained one extra week compared to the prior year, which added approximately $132 million to sales. On a comparable store sales basis, which excludes the extra week and closed stores, sales increased by 1.1%.
For the full year 2025, the company reported adjusted diluted EPS of $2.26, a sharp reversal from a loss of $0.29 per share in 2024. Full-year net sales were $8.60 billion, down from $9.09 billion in the prior year, largely due to the impact of store closures under its restructuring plan.
Market Reaction and Price Action
The immediate market response to the earnings report was decisively bullish. A pre-market gain of over 7.5% suggests investors are focusing on the substantial earnings beat and the improved profitability narrative rather than the flat top-line growth. This positive momentum builds on recent strength in the stock, which has seen gains of approximately 21% over the past two weeks and 36% over the past month, potentially reflecting growing optimism ahead of the earnings release.
Key Elements from the Earnings Report
The press release highlighted a year of foundational progress under CEO Shane O'Kelly's strategic plan. The most critical takeaways center on a return to profitability and operational improvements.
- Return to Profitability: After reporting an adjusted operating loss of $99 million in Q4 2024, the company generated adjusted operating income of $73 million in Q4 2025, representing a 3.7% margin. For the full year, adjusted operating income jumped to $216 million (2.5% margin) from $35 million (0.4% margin) in 2024.
- Gross Margin Expansion: A major driver of the profit recovery was a significant improvement in gross margin. Adjusted gross profit margin expanded to 44.2% in Q4 2025, up 520 basis points from 39.0% in the prior year quarter. Management cited the cycling of atypical restructuring items, operational savings from footprint optimization, and strategic sourcing initiatives as key contributors.
- Cost Discipline: The company also demonstrated improved cost control. Adjusted selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased to 40.5% from 43.9% in the year-ago quarter.
2026 Guidance Versus Analyst Expectations
Alongside its historical results, Advance Auto Parts provided full-year 2026 guidance, offering a measurable benchmark for its ongoing turnaround. The company's sales outlook appears cautious compared to current analyst projections, while its profit forecast suggests continued margin recovery.
- Sales Guidance: The company expects 2026 net sales between $8.485 billion and $8.575 billion, with comparable store sales growth of 1.0% to 2.0%. This sales range is below the current analyst consensus estimate of approximately $8.76 billion for the year.
- Earnings Guidance: On profitability, the company forecast an adjusted operating income margin between 3.8% and 4.5%, and adjusted diluted EPS in a range of $2.40 to $3.10. The midpoint of the EPS guidance ($2.75) is below the current analyst consensus for the full year 2026, which stands at approximately $2.70 billion in revenue and an implied EPS that would require calculation from the provided sales and revenue estimates. The provided analyst revenue estimate for FY2026 is $2.70 billion, which appears to be a discrepancy with the sales figure; typically, revenue and sales are synonymous for a retailer like AAP. The company's guided sales range of $8.5-$8.6 billion is the primary top-line metric for comparison.
- Capital Allocation & Store Growth: The guidance also includes plans for approximately $300 million in capital expenditures, a return to positive free cash flow of about $100 million, and modest store growth with 40-45 new store openings and 10-15 new market hub openings.
For a detailed breakdown of future earnings estimates and historical performance, you can review the earnings and estimates data for AAP.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial analysis, or a recommendation to buy or sell any security. The data presented is based on publicly available information and earnings reports. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
