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AutoZone (AZO) Likely to Maintain its Earnings Beat Run in Q1

AutoZone AZO is slated to release first-quarter fiscal 2023 results on Dec 6, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings and revenues is pegged at $25.15 per share and $3.84 billion, respectively.

The Zacks Consensus Estimate for fiscal first-quarter earnings per share has moved 33 cents south in the past seven days. The bottom-line projection, however, indicates a year-over-year contraction of 2.1%. The Zacks Consensus Estimate for quarterly revenues implies a 4.6% rise from the prior-year level.

The automotive parts retailer posted better-than-anticipated results in the last reported quarter.  Earnings of $40.51 per share improved 13.4% from the prior-year figure and topped the Zacks Consensus Estimate of $38.38 a share. Over the trailing four quarters, the company surpassed earnings estimates on all occasions, with the average being 16.6%. This is depicted in the graph below:

AutoZone, Inc. Price and EPS Surprise

AutoZone, Inc. Price and EPS Surprise
AutoZone, Inc. Price and EPS Surprise

AutoZone, Inc. price-eps-surprise | AutoZone, Inc. Quote

What Does Our Model Say?

Our proven model predicts an earnings beat for AutoZone this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: AutoZone has an Earnings ESP of +1.86%. This is because the Most Accurate Estimate is pegged 47 cents higher than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AutoZone carries a Zacks Rank of 3 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors at Play

AutoZone’s wide-ranging product portfolio, serving both retail DIY (‘Do-It-Yourself) and commercial DIFM (‘Do-It-For-Me) businesses, is likely to have boosted comparable sales growth during the to-be-reported quarter. Continued strength across its DIY as well as commercial business amid the expansion of coverage and parts availability is expected to drive results in the to-be-reported quarter.  The Zacks Consensus Estimate for fiscal first-quarter’s comps growth is pegged at 3.37%.

The company’s digitalization efforts to enhance customers’ shopping experience are also likely to have boosted sales. Ship-to-home next day, buy online and curbside pick-up options are expected to have supported AutoZone’s sales. AZO’s initiatives to enhance in-store systems and website traffic are expected to have aided quarterly performance. Store expansion initiatives are also expected to have provided a boost to revenues. The Zacks Consensus Estimate for total store count at the end of the quarter under discussion is 6,974, up from 6,943 in the fourth-quarter of fiscal 2022.

But while doubling down on expansion with new distribution centers, mega hubs and stores may have boosted AutoZone’s revenues, it may have strained near-term operating margins.

Peer Releases

AutoZone’s close peers include Advance Auto Parts, Inc. AAP and O’Reilly Automotive ORLY.

Advance Autoreleased third-quarter 2022 results on Nov 15.  The company’s adjusted earnings of $2.84 per share were down 11.5% from the year-ago quarter figure and missed the Zacks Consensus Estimate of $3.32 a share. Revenues of $2,641.3 million fell short of the Zacks Consensus Estimate of $2,652 million and inched down 0.8% from the year-ago reported figure. Advance Auto estimates 2022 net sales in the band of $11-$11.2 billion.The company targets an FCF of a minimum of $300 million. Adjusted EPS is forecast between $12.60 and $12.80. The auto parts retailer now intends to buy back a maximum of $600 million worth of shares in 2022. It aims to open 125-150 new stores this year.

O’Reilly posted third-quarter 2022 results on Oct 26. Adjusted earnings per share of $9.17 surpassed the Zacks Consensus Estimate of $8.46. The bottom line increased 13.6% from $8.07 in the prior-year quarter. The automotive parts retailer registered quarterly revenues of $3,799.6 million, crossing the consensus mark of $3,713 million. The top line was 9% higher than the prior-year figure of $3,479.5 million. ORLY expects 2022 revenues within the range of $14.1-$14.3 billion. Earnings per share are pegged within $32.35-$32.85. Free cash flow is projected in the band of $1.8-$2.1 billion.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar

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