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AutoZone (AZO) Up 4.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for AutoZone (AZO - Free Report) . Shares have added about 4.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AutoZone due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

AutoZone Q4 Earnings and Sales Surpass Estimates

AutoZone reported earnings of $30.93 per share for the fourth quarter of fiscal 2020 (ended Aug 29, 2020), up from the prior-year figure of $22.59. The bottom line also surpassed the Zacks Consensus Estimate of $24.74. Higher-than-expected comparable sales growth led to the outperformance. Net income rose 31% year over year to $740.5 million. Net sales also increased 14% year over year to $4,545.9 million. The top line also surpassed the Zacks Consensus Estimate of $4,047 million.

Domestic commercial sales totaled $975.6 million, up from $886.5 million recorded in the year-ago quarter. The metric also topped the consensus mark of $906 million. Domestic same-store sales (sales at stores open at least for a year) grew 21.8% year over year, comfortably surpassing the Zacks Consensus Estimate of 1.8%.

Gross profit increased to $2,412.9 million from the prior-year quarter’s $2,130 million on the back of higher sales. Operating profit also surged to $1,018 million from $780.7 million registered in the year-ago period.

Store Opening & Inventory

During the fiscal fourth quarter, AutoZone opened 49 stores in the United States, 11 in Mexico and five in Brazil. It exited the quarter with 5,885 stores in the United States, 621 in Mexico and 43 in Brazil. Total store count was 6,549 as of Aug 29, 2020.

AutoZone’s inventory improved 3.6% year over year for the reported quarter on store openings and increased product placement. At quarter-end, inventory per location was $683,000, up from the year-ago figure of $674,000.

Financials and Share Repurchases

AutoZone had cash and cash equivalents of $1,750.8 million as of May 9, 2020, up from $176.3 million on Aug 31, 2019. Total debt amounted to $5,513.4 million as of Aug 29, 2020, marking an increase from $5,206.3 million on Aug 31, 2019.

During the quarter, the company tapped brakes on the share buyback program amid the coronavirus crisis. For the fiscal 2020, AutoZone repurchased 826,000 shares for $930.9 million at an average price of $1,127 per share. The company has shares worth $796 million remaining in the current repurchase authorization.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 14.73% due to these changes.

VGM Scores

Currently, AutoZone has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise AutoZone has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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