Oct 20, 2026 earnings call — Separation update and Q3 results
Q3 sales $6.5 billion and adjusted EPS $2.07; management narrowed full-year adjusted EPS guidance.
Revenue $6.5B (est $6.5B) · EPS $2.07 (est $2.04)
Key quotes
"I will review our third quarter results by segment, and share an update on the planned separation, which remains on track for completion in the first quarter of 2027."
"It was valuable to see firsthand the technology and automation we are deploying across our operations and the additional opportunities we have to expand those capabilities across the network."
"The estimated impact of the Iran conflict on EBITDA in the quarter was $16 million or $0.09 per share."
Analyst Q&A 6
Inflation and cost outlook
Q (Greg Melich · Evercore): He asked what inflation rate the company expects for the rest of the year and into next year. He also asked if softer auto sales in September continued into the fourth quarter.
A: Management said they expect about 2.5% inflation for the rest of the year and, if the Iran conflict persists, a low single digit top-line benefit into 2027. They said cost pressure is across line items — freight mid single digits, rent elevated, healthcare double-digit — leading to about a 3% to 4% cost inflation impact for the year. They added they are using restructuring and cost actions to offset these pressures and have kept people costs flat as a percentage of sales.
"Assuming that the conflict persists, I think we are gonna always remain in that low single digit top line benefit." — Herbert C. Nappier
Reasons for margin decline
Q (Michael Lasser · UBS): They asked how much of the margin decline is transitory cost pressure versus structural change and what comp level is needed for consistent positive margin flow-through.
A: Management said the North American EBITDA decrease was $6 million, which drove a 40 basis point margin decline, and that the impact came from SG&A tied to inflation from the Iran conflict. They said freight, fuel, and rent increases totaled $15 million year over year and also noted a merit increase for US hourly workers. They said without these inflation-driven costs they would have seen a 20 basis point improvement and plan to give longer-term algorithm detail at Investor Day.
"We had increases in freight, fuel, and rent that totaled $15 million year over year." — Herbert C. Nappier
Iran conflict effects and owner health
Q (Scot Ciccarelli · Truist): He asked which parts of the business the Iran conflict is affecting — costs, rent, or sales — and whether higher interest rates will keep independent owners under pressure.
A: Management said the Iran impact is isolated to the top line, moderating retail auto demand, and their third quarter matched their forecast. They said Iran-driven cost pressure is mainly freight and fuel and they now expect $30 million to $40 million of impact for the rest of the year; rent pressure is from post-COVID renewals and not directly Iran-related. On independent owners, they said top owners have strong balance sheets and are investing, and they are running initiatives and technology tools to partner with and support stronger independents; early returns look positive and they will discuss more at Investor Day.
"We now see that to be $30 million to $40 million." — Herbert C. Nappier
Motion guide and NAPA DC plan
Q (Christopher Dankert · D.A. Davidson): He asked if the weaker implied Q4 guide for Motion is just conservatism. He also asked if the new Eastern PA DC brings cost opportunities or consolidation in the DC network.
A: Management said they are being prudent on Q4 because the quarter is dynamic with holidays and some customers slow production in November and December, but Motion left September and started October steady and is performing well. On the new DC, they said there are both revenue and cost opportunities: broader product scope closer to stores will improve fill rates and revenue, and robotics, automation, and real estate consolidation will create operating leverage and cost savings. They added past supply chain investments make them smarter about creating value from these investments.
"So we think this is a great win better service to customers, great working environment for team members, and a good cost out opportunity as well." — Cort Carruthers (CEO)
Independent owners quartiles performance
Q (Bret Jordan · Jefferies): He asked whether the gap between top quartile independents and the average or bottom quartile has narrowed and whether independent field inventory is lower in Q3.
A: Management said the bottom quartile improved from Q2 to Q3 after core trialing and other actions, which suggests their programs are lifting lower performers. They said inventory work is ongoing to get the right part to the right place at the right time and that both bottom quartiles showed sequential improvement. They will share more detail at Investor Day.
"And I think just sequentially, those bottom 2 quartiles did improve from Q2 to Q3." — Cort Carruthers (CEO)
Why UK is outperforming
Q (Bret Jordan · Jefferies): He asked if U.K. outperformance is due to competitors exiting, more rational pricing, or improving demand and execution.
A: Management said the U.K. improvement is driven by improving underlying demand in a choppy market and by better controllable execution after supply chain investments. They said scale and a broad offering matter versus smaller disruptive players, and that recent investments are proving out and helping performance.
"I think it is improving underlying demand in a choppy market, sequentially." — William Stengel (CEO·CHAIR)