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AutoZone Hits Fresh 52-Week High: What's Behind the Rally?

Zacks Equity Research

Shares of AutoZone, Inc. AZO scaled a fresh 52-week high of $1,049.73 on Apr 5, before closing the day at $1048.52.

The specialty retailer of automotive replacement parts and accessories has a market cap of roughly $26.1 billion. For the current fiscal year, its expected earnings per share growth rate is pegged at 22.6%, higher than the industry’s average of 3.7%.

AutoZone’s shares gained 29.2% in the last three months, outperforming the industry’s growth of 19.4%.


Driving Factors

This auto specialty retailer is growing presence in two different customer bases through DIY (Do-It-Yourself) and commercial (DIFM) businesses. In the first half of fiscal 2019, AutoZone’s DIY market share continued to grow, driven by parts and staffing initiatives. Further, the commercial business witnessed double-digit growth of 12.9% in second-quarter fiscal 2019, owing to the company’s stronger foundation along with upgraded availability of inventory. AutoZone projects the businesses to grow in the second half of fiscal 2019, driven by high-quality products, fast deliveries and store merchandising.

The company is also increasing the number of hubs and mega hubs across markets to enhance the supply-chain network, supporting it to cater to the needs at the local level, where customer demand is immediate. At the end of second-quarter fiscal 2019, it had 171 hubs and 27 mega hubs, totaling 198 stores with significantly expanded parts assortments. Continuing with expansion plans, AutoZone aims to open 16 hubs in fiscal 2019.

In order to improve competitive position in the market and advance the electronic portfolio, the company is undertaking several technology investments for the long term. A dedicated supply chain, providing upgraded products, will drive sales growth across all of its businesses.

Over the last two months, the Zacks Consensus Estimate for AutoZone’s third-quarter and fiscal 2019 earnings moved upward by 3.5% and 1.9%, respectively.

AutoZone, Inc. Price and Consensus


AutoZone, Inc. Price and Consensus | AutoZone, Inc. Quote

Zacks Rank & Other Key Picks

AutoZone currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the broader auto sector are CarGurus, Inc. CARG, Fox Factory Holding Corporation FOXF and General Motors Company GM, each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CarGurus has an expected long-term growth rate of 5%. Over the past three months, shares of the company have gained 16.9%.

Fox Factory has an expected long-term growth rate of 15.1%. The stock has gained 20% in the past three months.

General Motors has an expected long-term growth rate of 8.9%. Over the past three months, shares of the company have gained 11.9%.

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