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AutoZone (AZO) Q1 Earnings: Is a Surprise in the Cards?

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AutoZone, Inc. (AZO - Free Report) is expected to report first-quarter fiscal 2017 (ended Nov 19, 2016) results on Dec 6, before the opening bell. In the last quarter, the company posted a positive earnings surprise of 0.07%. Let’s see how things are shaping up prior to this announcement.

Factors Influencing this Quarter

AutoZone’s earnings per share have grown in double digits for 40 consecutive quarters. However, the company has been facing significant currency headwinds related to the Mexican peso and Brazilian real. Its EBIT was down 1% in both the first and the third quarter, and 2% in the second quarter of fiscal 2016 due to currency headwinds. Management expects this pressure to continue until the peso falls from the elevated level.

Also, AutoZone expects its capital and operating expenses to rise over the next three years, backed by its plans to open two to three new distribution centers over this time frame. Further, the company is increasing the frequency of deliveries to its stores to three or five times a week from just once a week. This will lead to gross margin headwinds of around 15–20 basis points every quarter until the completion of the rollout.

Earnings Whispers

Our proven model does not conclusively show that AutoZone is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. AutoZone’s Earnings ESP is 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $9.34. 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 #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Price Performance

In the last three months, share price of AutoZone increased 5.55% while the Zacks-categorized Nonfood Retail Wholesale industry saw a 1.31% decrease. The company benefitted from strong results recorded in the fourth quarter of fiscal 2016. AutoZone has been gaining from store expansion and aggressive share repurchases.

AUTOZONE INC Price and EPS Surprise

 

AUTOZONE INC Price and EPS Surprise | AUTOZONE INC Quote

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

General Motors (GM - Free Report) , which will report fourth-quarter 2016 results on Feb 1, 2017, has an Earnings ESP of +1.69% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Autoliv, Inc. (ALV - Free Report) has an Earnings ESP of +2.22% and a Zacks Rank #3. The company will report fourth-quarter 2016 financial numbers on Feb 3.

Ford Motor Company (F - Free Report) has an Earnings ESP of +2.7% and a Zacks Rank #3. The company is expected to release fourth-quarter 2016 results on Jan 26.

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