Investors last week punished U.S. Auto Parts Network Inc. after the online distributor of aftermarket automotive parts and accessories reported another loss related to its integration of a key acquisition.
Shares of the Carson company skidded 26 percent for the week that ended Nov. 9, then it went down even more the following day. It was one of the biggest losers on the LABJ Stock Index.
U.S. Auto Parts reported a third quarter loss of $5.3 million, which included $3.8 million in costs related to its 2010 acquisition of JC Whitney, a former competitor in the aftermarket car parts sector. U.S. Auto Parts’ family of sites includes AutoPartsWarehouse.com, StylinTrucks.com and AutoMD.com.
U.S. Auto Parts bought Chicago’s Whitney for $27.5 million plus about $11 million in debt. The deal was widely praised at the time. But the company has taken longer than expected to integrate Whitney’s operations and inventory, and that has dragged down financial results for several quarters.
In a conference call with analysts, Chief Executive Shane Evangelist said the integration was completed just after the end of the quarter.
“We certainly have not executed up to our expectations and we all recognize the need to do better,” Evangelist said. “I believe most of the heavy lifting has been completed and that the third quarter will be our transitional lower point for the fiscal year.”
U.S. Auto Parts reported third quarter revenue of $79.6 million, with Whitney contributing $19.2 million. Excluding Whitney, revenue growth was up only 1.2 percent.
Analyst Mitchell Bartlett at Minneapolis-based Craig Hallum Capital Group LP downgraded the company’s stock to “hold” and lowered his 12-month target price from $11 to $6. Jared Schramm at Roth Capital Partners in Newport Beach maintained his “buy” recommendation on shares but also lowered his price target to $6.
Even so, six of the nine analysts covering the company still have “buy” or “outperform” recommendations, with the remainder remaining “neutral.”
Ross Sandler at Canada’s RBC Capital Markets told clients in a note that U.S. Auto Parts had “stumbled” several times this year, and likely wouldn’t have a “clean” quarter until the middle of next year.
Even so, U.S. Auto Parts “is a leading player in an underpenetrated, fragmented and above-average margin market,” said Sandler, who has an “outperform” on shares, but cut his price target from $10 to $8 after the earnings report.
