It has been about a month since the last earnings report for AutoZone (AZO). Shares have lost about 5.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is AutoZone due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
AutoZone Q3 Earnings and Sales Surpass Estimates
AutoZone delivered earnings of $14.39 per share in the third quarter of fiscal 2020 (ended May 9, 2020), down from the prior-year quarter figure of $15.99. The reported figure, however, surpassed the Zacks Consensus Estimate of $13.82. Net income declined 15.5% year over year to $342.9 million.
In the fiscal third quarter, net sales slid 0.14% year over year to $2.78 billion. Yet, the top line surpassed the Zacks Consensus Estimate of $2.72 billion.
Domestic commercial sales totaled $573.8 million, down from the $614.8 million recorded in the year-ago quarter. Domestic same-store sales (sales at stores open at least for a year) edged down 1% year over year.
Gross profit decreased to $1,490.6 million from the prior-year quarter’s $1,492 million. Operating profit also went down to $491.7 million from the $547.5 million registered in the year-ago period.
Store Opening & Inventory
During the fiscal third quarter, AutoZone opened 21 stores in the United States, two in Mexico and none in Brazil. It exited the quarter with 5,836 stores in the United States, 610 in Mexico and 38 in Brazil. The total store count was 6,484 as of May 9, 2020.
AutoZone’s inventory improved 2.7% year over year in the reported quarter on store openings and increased product placement. At the end of the quarter, inventory per location was $685,000, down from the year-ago figure of $688,000.
Financials and Share Repurchases
AutoZone had cash and cash equivalents of $509.12 million as of May 9, 2020, up from $174.1 million as of May 4, 2019. Total debt amounted to $5,418.3 million as of May 9,2020, marking an increase from $5,151.9 million as of May 4, 2019.
In the fiscal third quarter, AutoZone repurchased 156,000 shares for $166.1 million at an average price of $1,064 per share. At the end of this period, the company had shares worth $796 million remaining in the current repurchase authorization. However, the company temporarily suspended its share-repurchase program on the coronavirus scare.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 6.32% due to these changes.
At this time, AutoZone has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, AutoZone has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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