AutoZone (AZO) Delights Investors With $2B Buyback Boost
Auto parts retailer AutoZone AZO recently increased its share buyback authorization again by $2 billion. Last year, the company authorized an additional buyback of $1.5 billion of its common stock thrice. Since the inception of the buyback program in 1998, AutoZone has authorized $31.2 billion in stock repurchase, including the latest amount.
In fiscal 2021, the firm repurchased $3.4 billion of its outstanding shares. It has bought back close to 90% of its outstanding shares since 1998. AutoZone repurchased $1.6 billion shares in the last reported quarter. At the end of the second quarter of fiscal 2022, AZO had over $958 million remaining under its share repurchase program. The latest buyback boost is in line with AutoZone’s commitment to boost shareholder value. The company’s disciplined capital allocation approach to reinvest in the business as well as engage in meaningful investor-friendly moves is laudable.
The announcement of the repurchase plan follows AZO's better-than-expected second-quarter fiscal 2022 results. The company not only delivered a comprehensive beat but also witnessed a year-over-year surge in sales and profits. Adjusted earnings of $22.30 per share in second-quarter fiscal 2022 rose 49.4% from the prior-year figure and surpassed the Zacks Consensus Estimate of $17.80. Robust comparable sales growth led to this outperformance. Net sales grew 15.8% to $3,369.8 million and beat the Zacks Consensus Estimate of $3,157.1 million.
AutoZone’s revenue growth is impressive, with the company generating record sales for 23 consecutive years. It expects the momentum to sustain through fiscal 2022 on continued strength across its DIY and commercial business, along with the focus on increasing its market penetration via expansion of mega hubs. The ramp-up of e-commerce efforts is also driving traffic to the company’s online site, thereby helping the company to deliver sizzling growth.
Backed by fundamental strength and a commitment to maximizing shareholder value, AutoZone is expected to continue with its efficient capital deployment activities, thereby boosting investors’ confidence. AutoZone — whose peers include Advance Auto Parts AAP and O’Reilly Automotive ORLY — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investor-Friendly Moves of Peers
Advance Auto: In 2021, Advance Auto returned $1 billion through share repurchases and dividends. Last month, the company boosted its buyback program by $1 billion and hiked its dividend by 50%, supported by balance sheet, solid quarterly results and strong prospects going forward.
Advance Auto estimates 2022 net sales in the band of $11.2-$11.5 billion, up from 2021 sales of $10.99 billion. Adjusted operating income margin is envisioned to be 10-10.2%, up from 9.6% in 2021. Adjusted EPS is forecast between $13.20 and $13.75, up from $12.02 in 2021. AAP currently carries a Zacks Rank of 3.
O’Reilly: In 2021, O’Reilly repurchased 4.5 million shares for $2.48 billion. As of Feb 9, 2022, O’Reilly has around $1.79 billion remaining under its share repurchase authorization program. Strong cash flow generation is supporting the firm’s robust buyback program. O’Reilly’s annualized cash flow growth rate has been 14.7% over the past 3-5 years versus the industry average of 8.5%.
For the current year, O’Reilly now projects total revenues within $14.2-$14.5 billion, up from $13.3 billion generated in 2021. It expects comparable store sales to rise 5-7% in 2022. Earnings per share are envisioned within $32.35-$32.85, representing a 5% year-over-year growth at the mid-point of expectations. The 2022 EPS projection implies a three-year CAGR of 22%. ORLY currently carries a Zacks Rank of 3.
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