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AutoZone’s 4Q Earnings Top Estimates, Analysts See Strong Upside Ahead

support@smarteranalyst.com (Ben Mahaney)
·3 min read

AutoZone delivered better-than-anticipated results for the fourth quarter of fiscal 2020, which ended on August 29. After rising initially shares of the auto parts retailer were down 1.6% on Tuesday.

AutoZone’s (AZO) fiscal 4Q revenue increased 14% Y/Y to $4.55 billion as domestic same-store sales surged 21.8%, marking the highest quarterly growth since the company went public in 1991. Demand for auto parts increased amid the pandemic with the company’s DIY (do-it-yourself) same-store sales rising 24%. Adjusted EPS of $30.93 grew 47.6% Y/Y. Analysts expected EPS of $25.46 on revenue of $4.18 billion.

The company noted that the sales performance in August slowed as enhanced unemployed benefits subsided. While lower compared to May through July, August same-store sales still rose 16.5%.

Looking ahead, Autozone expects sales growth to moderate over time. But, it continues to see high demand for its products and services during these difficult economic times. The company had temporarily suspended its shares buyback program in March but expects to gradually restart in the first quarter of fiscal 2021. (See AZO stock analysis on TipRanks)

Following the results, Wells Fargo analyst Zachary Fadem reiterated his Buy rating with a price target of $1375, explaining that the shares are trading at an attractive entry point with “ample positive catalysts (growing car parc, de-urbanization, share gains vs. sub-scale players, etc.)”, low expectations and lower valuation than peers like O'Reilly Automotive.

Supporting his bullish stance, the analyst said, “As the largest aftermarket auto part retailer in the U.S., we see positives from favorable industry dynamics and opportunities to scale its under-indexed commercial business (78% DIY and 22% Pro), International footprint (Mexico/Brazil) and budding online sales platform.”

Similarly, CFRA analyst Garrett Nelson also reaffirmed a Buy rating with a $1,350 price target stating “AutoZone has uniquely benefited from stay-at-home trends.”

Credit Suisse analyst Seth Sigman reiterated a Buy rating and $1,300 price target, after the “very solid” quarter, with “signs of continued strength in DIY and likely market share gains in DIFM (do it for me), which should bode well for this stock.”

Overall, the average analyst price target of $1384 implies an upside potential of about 19% in the coming months in AutoZone stock, which has declined 2% year-to-date. The Street’s Strong Buy consensus for AutoZone breaks down into 9 Buys, 1 Hold and no Sell ratings.

This image has an empty alt attribute; its file name is Autozone-1.png
This image has an empty alt attribute; its file name is Autozone-1.png

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