AutoZone to Grow on Strong Core Business, Share Buybacks - Analyst Blog
On Feb 23, 2015, we issued an updated research report on AutoZone, Inc. (AZO). This Zacks Rank #3 (Hold) stock had reported positive earnings surprises in three of the trailing four quarters with an average beat of 0.74%.
AutoZone reported a 15.6% rise in earnings per share (EPS) to $7.27 for the first quarter of fiscal 2015 (ended Nov 22, 2014) from $6.29 in the year-ago quarter. The EPS also surpassed the Zacks Consensus Estimate of $7.18.
Quarterly revenues increased 8% year over year to $2.26 billion, surpassing the Zacks Consensus Estimate of $2.22 billion.
The first quarter of fiscal 2015 marks the 33rd consecutive quarter during which AutoZone’s EPS have grown in double digits. 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.
However, we remain concerned about the falling cash balance, consolidation among vendors and a heavy reliance on private-label brands, which may affect margins. Despite ample cash flows, AutoZone’s cash balance is slowly declining, while its debt balance is rising.
The company’s cash and cash equivalents fell to $117.2 million as of Nov 22, 2014 from $125.9 million as of Nov 23, 2013. AutoZone’s total debt increased to $4.42 billion as of Nov 22, 2014 from $4.17 billion as of Nov 23, 2013. Even the net cash flow before share repurchases and changes in debt fell to $214 million in the first quarter of fiscal 2015 from $288.7 million in the first quarter of fiscal 2014.
AutoZone is set to report its second-quarter fiscal 2015 financial results on Mar 3. The Zacks Consensus Estimate for the company’s earnings is pegged at $6.37 per share, which represents a 13.1% year-over-year improvement.
Key Picks from the Sector
Better-ranked automobile stocks include Superior Industries International, Inc. (SUP), Tata Motors Ltd. (TTM) and Wabash National Corp. (WNC), all sporting a Zacks Rank #1 (Strong Buy).
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