Why is AutoZone (AZO) up 7.1% since its last earnings report?

About a month has passed since AutoZone (AZO) last reported earnings. Shares have risen about 7.1% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AutoZone headed for a recession? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

AutoZone surprises with third quarter results, sales lady

AutoZone reported earnings per share of $36.69 for the third quarter of fiscal 2024 (ended May 4, 2024), an increase of 7.5% year over year. Earnings surpassed the Zacks Consensus Estimate of $35.72 per share. Net sales increased 3.5% year-over-year to $4,235.5 million. The top line missed the Zacks Consensus Estimate of $4,292 million.

Domestic commercial sales totaled $1.14 billion for the quarter, compared to $1.11 billion reported in the same period a year ago. Domestic same-store sales (sales in stores open for at least one year) remained stable.

Gross profit rose to $2.26 billion from $2.14 billion in the year-ago quarter. Operating profit increased 4.8% year over year to $900 million.

Opening the store and inventory

AutoZone opened 32 new stores in the United States this quarter. It opened 12 new stores in Mexico and one in Brazil. It ended the quarter with 6,364 stores in the United States, 763 in Mexico and 109 in Brazil. The total number of stores was 7,236 as of May 4, 2024.

In the reported quarter, inventories increased by 8% year-on-year. At the end of the quarter, inventory per store was $851,000, compared to $810,000 a year ago.

Financial data and share buyback

As of May 4, 2024, AutoZone had cash and cash equivalents of $275.4 million, compared to $277.1 million as of August 26, 2023. AutoZone’s total debt was $8.5 billion as of May 4, 2024 May 2024 compared to USD 7.67 billion as of August 26, 2024, 2023.

During the fiscal third quarter, the company repurchased 242,000 shares of common stock for $737.7 million, at an average price of $3,036 per share. At the end of the quarter, $1.4 billion remained under the current share repurchase authority.

How have estimates changed since then?

Last month, investors saw a downward trend in new estimates.

VGM results

At this point, AutoZone has an average Growth Score of C, although it lags in the Momentum Score with an F. However, the stock is rated a B for Value, ranking in the top 40% for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, AutoZone carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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