Auto Parts Submarket Looking Good: AutoZone Surpasses Earnings Estimates

Anticipations from AutoZone, Inc. (NYSE: AZO) quarter results were quite high since most estimates were aiming for growth compared to previous periods. That is why investors were expecting good results from AutoZone as well as from other companies in the market segment like Advance Auto Parts, Inc. (NYSE: AAP), O'Reilly Automotive, Inc. (NASDAQ: ORLY) and CarMax, Inc. (NYSE: KMX). Even the revised Zacks Consensus Estimate indicated an increase of 3.3% from previous year earnings of 76 cents per share and revenue growth of 5.3%.

Quarter Results

AutoZone, Inc. announced its second fiscal quarter results (the quarter ending February 15th). Not only that the achieved earnings per share of $12.39 topped Zacks Consensus Estimate of $11.87, but this was a nice increase from the prior-year quarter amount of $11.49. Net income also grew up 1.6% when comparing year to year, finishing at $299.3 million.

Quarter revenues were also increased by 2.6% year over year, but the achieved $2,513.7 million was lower than the Zacks Consensus Estimate of $2,580 million. When looking only at domestic sales, quarter revenues were $556.9 million, which is an increase from the same quarter previous year when revenues were $514.6 million. Gross profit increased from $1,325.1 million achieved in the year-ago quarter to $1,366 million, which insured the operating profit growth from $400 million to $407.9 million (quarter to quarter).

What Factors Are Pushing The Good Results

Both Do-It-Yourself and Do-It-For-Me businesses have been enjoying sales growth, and this is probably the main reason for this quarter's good results. Alongside store expansions, the company also worked on fast deliveries and high-quality products, aiming to grab more market share.

Along with expansions, improvements in inventory management and technological advancements were crucial for the development of the company's supply-chain network, so it can satisfy customers' demand on the local level faster. All of that made the Duralast brand even stronger.

What Is Happening With Other Players In The Auto Parts Market

Let's look at some specialized equipment for cars. Worksport and its parent company Franchise Holdings International (OTC: FNHI) is out with its new line of tonneau covers, a great accessory for pick-up trucks offering a link to solar power and announced this morning that it has been awarded a Canadian Patent. Their tonneaus can be connected to electric engines in currently owned pick-up trucks. And that is no matter the model, make and year. Next to the current providers, Worksport tonneau covers are also expected to be found on Amazon.com, Inc. (NASDAQ: AMZN).

Outlook

It is hard to say what impact will the coronavirus outbreak have on this market subsegment, but growth in both Do-It-Yourself and Do-It-For-Me businesses may continue in the following periods, pushing the company's results further up. On the other hand, AutoZone is currently ranked by Zacks Rank with #3, which is a hold ranking.

Some companies in the auto, tires, and trucks segment with better Zacks Rank are LCI Industries (NYSE: LCII), SPX Corporation (NYSE: SPXC) and Adient plc (NYSE: ADNT). Overall, this subsegment is doing a lot better than the overall  automotive market. How it will adhere to the electric era is a different question – for many but not for Worksport whose intellectual property portfolio has it all set to welcome the electric future.

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