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Shares of AutoZone (AZO) have been strong performers lately, with the stock up 4.4% over the past month. The stock hit a new 52-week high of $1694.27 in the previous session. AutoZone has gained 42% since the start of the year compared to the -5.4% move for the Zacks Retail-Wholesale sector and the 38.6% return for the Zacks Automotive - Retail and Wholesale - Parts industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on September 21, 2021, AutoZone reported EPS of $35.72 versus consensus estimate of $30.2 while it beat the consensus revenue estimate by 7.61%.
For the current fiscal year, AutoZone is expected to post earnings of $94.22 per share on $14.29 billion in revenues. This represents a -1.02% change in EPS on a -2.33% change in revenues. For the next fiscal year, the company is expected to earn $106.85 per share on $15.01 billion in revenues. This represents a year-over-year change of 13.4% and 5.07%, respectively.
AutoZone may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
AutoZone has a Value Score of C. The stock's Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 17.9X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 18.4X versus its peer group's average of 20X. Additionally, the stock has a PEG ratio of 1.57. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, AutoZone currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if AutoZone meets the list of requirements. Thus, it seems as though AutoZone shares could have a bit more room to run in the near term.
How Does AutoZone Stack Up to the Competition?
Shares of AutoZone have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Caseys General Stores (CASY), Lithia Motors (LAD), and Costco Wholesale (COST), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 8% of all the industries we have in our universe, so it looks like there are some nice tailwinds for AutoZone, even beyond its own solid fundamental situation.
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AutoZone, Inc. (AZO) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report
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