Will AutoZone (AZO) Outperform Earnings Estimates in Q2?
AutoZone, Inc. AZO is expected to report second-quarter fiscal 2016 (ended Feb 13, 2016) results on Mar 1. In the last quarter, the company delivered a positive earnings surprise of 1.10%. Further, the company managed to beat earnings in each of the last four quarters with a positive average surprise of 13.43%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that AutoZone is likely to beat earnings this quarter because it has the right combination of the two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +0.96%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: AutoZone currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.
The combination of AutoZone’s Zacks Rank #3 and positive ESP make us reasonably confident of a positive earnings beat.
What is Driving Better-than-Expected Earnings?
AutoZone’s earnings per share have grown in double digits for 37 consecutive quarters. Earnings are expected to rise further, driven by flourishing revenues and higher gross margin from both the retail and commercial businesses, together with increasing store count and regular share buybacks. AutoZone is also focused on growing same-store sales.
AutoZone uses its significant cash flow to open new stores every year. The strong cash flows also help the company to aggressively repurchase shares. In Oct 2015, AutoZone increased its share repurchase authorization by $750 million. Including this new authorization, the company’s board has authorized a total of $16.4 billion for buying back shares since 1998. AutoZone remains focused on enhancing shareholder returns, while simultaneously maintaining adequate liquidity for its business strategies.
Stocks to Consider
Here are some other companies you may want to consider as our model shows that these have the right combination of elements:
Superior Industries International, Inc. SUP has an Earnings ESP of +11.11% and a Zacks Rank #1. The company will report fourth-quarter 2015 results on Mar 7.
Ford Motor Co F has an Earnings ESP of +2.22% and a Zacks Rank #3. The company will report first-quarter 2016 financial numbers on Apr 28.
Cooper Tire & Rubber Co. CTB has an Earnings ESP of +3.23% and a Zacks Rank #1. The company is expected to report first-quarter 2016 results on May 24.
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FORD MOTOR CO (F): Free Stock Analysis Report
AUTOZONE INC (AZO): Free Stock Analysis Report
SUPERIOR INDS (SUP): Free Stock Analysis Report
COOPER TIRE (CTB): Free Stock Analysis Report
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