Advance Auto shares rise following upgrade

Gary Balter of Credit Suisse raised his rating to "Outperform" from "Neutral" after a recent visit with the company's management team.

Balter said that in the six months since Darren Jackson became Advance Auto's chief executive, the former Best Buy Co. executive has put in place a plan to boost Advance Auto's do-it-yourself sales by 15 percent and boost commercial sales to 50 percent of total sales from 25 percent.

Jackson also brought in a team of executives from Best Buy and elsewhere and cut unnecessary costs, Balter said.

"The pieces are in place for Mr. Jackson and his team to drive this turnaround leading us to upgrade Advance Auto shares from 'Neutral' to 'Outperform' as the momentum should build from here," Balter wrote in a note to investors.

In heavy afternoon trading, Advance Auto shares rose $2.03, or 5.2 percent, to $41.32. They peaked at $41.45 earlier in the day, within striking distance of the stock's 52-week high of $42.

The analyst said $70 million in cost cuts during the second half of 2007 helped boost the company's first-quarter results, along with higher commercial same-store sales, price increases and share buybacks.

While some of those cost savings are expected to be used to fuel growth initiatives, Balter said he expects many of those same factors to result in better-than-expected results for the next two quarters.