AutoZone sized up after sizzling earnings report

Sep. 22, 2020 10:37 AM ETAutoZone, Inc. (AZO)AZOBy: Clark Schultz, SA News Editor8 Comments
  • AutoZone (AZO -0.1%) is in focus after the retailer turned in an impressive earnings beat this morning, although expectations were already pretty high following the +60% 6-month rally.
  • CFRA Research (Strong Buy rating): "We raise our 12-month target price by $50 to $1,400 based on 17.0x our FY 22 (Aug.) EPS estimate, a premium to AZO's 5-year mean forward P/E of 16.2x on commercial growth potential. We increase our EPS estimates by $2.40 to $73.55 for FY 21 and by $2.75 to $82.25 for FY 22. AZO posts Aug-Q EPS of $30.93 vs. $22.59 (+36.9%), well ahead of the $24.51 consensus. The beat was driven by a stronger-than-expected top-line, as revenue increased 14% to $4.55 billion on a 21.8% surge in same store sales, well above the consensus forecasts of $4.15 billion and a 10.2% SSS increase. Gross margin contracted 30 bps to 53.1% (50 bps shy of consensus). As the auto aftermarket retailer most levered to the Do-It-Yourself auto repair market (78% of total revenue last year), AZO has uniquely benefited from stay-at-home trends. AZO did not repurchase any stock during the quarter. We reiterate our Strong Buy, viewing the record-high U.S. vehicle age (11.9 years) and used car market strength as powerful secular demand drivers."
  • Evercore ISI (In Line rating): "AutoZone FY4Q results are a record for the company in recent history, with profitable share gain amidst a favorable auto aftermarket backdrop. The challenge for the stock is cycling the monster 21.8% comp, and EPS of $30.93 that exceeded the Street’s $25.75 to keep EPS growing next year. We believe AZO will grow earnings next year, but prefer AAP for their DIFM driven comps at a similar 16.5-17.5x CY21 P/E with a restructuring story of its own, and ORLY at 22-23x CY21 for those that favor high quality compounders."
  • Compare AZO directly to peers ORLY, AAP and KMX.

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