Pep Boys Earnings Preview: Fourth Quarter 2009

Pep Boys [[PBY]] is scheduled to report fourth quarter 2009 results after the market closes on Wednesday, April 8. Based on our analysis, we at EarningsPreview.com are expecting PBY to report disappointing results that will miss Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $466.0 million and EPS of ($.36). This would represent a 10% decrease in revenues from last year’s $514.6 million in the same period. The current analyst consensus calls for revenues of $463.5 million and ($.26) EPS. On March 12, 2009 the company pre-announced estimated revenue of $466 million and EPS of ($.35) – ($.39) excluding one-time charges.

 

The general pullback in consumer spending during the fourth quarter of 2008 resulted in a weak holiday season and the deferral of tire purchases. Management expects revenues to decline 10% y/y. The weak sales results will undoubtedly continue to pressure margins and will lead to more losses in the short term.

 

Long term, we believe there are significant opportunities in the automotive aftermarket industry. Consumers are not going to be returning to car dealerships any time soon to purchase new vehicles. While that is bad for the car manufacturers, it represents a silver lining for Pep Boys. Individual consumers will now be more willing to spend money to keep their existing vehicles running where in years past they would have simply gone out and purchased a new vehicle.

 

Share Performance

Pep Boy’s shares are up 13% since the beginning of the year. In 2008, it fell 64% badly underperforming the 34% decline in the Dow Jones index. However, the stock has participated in the markets recent rally and finished the month of March up almost 40%.

 

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