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AutoZone (AZO) Rides on Store Openings, Expenses a Woe

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On Jun 18, we issued an updated research report on AutoZone, Inc. (AZO - Free Report) .

The Memphis, TN-based specialty retailer of automotive replacement parts and accessories, utilizes its cash strength to open new stores every year. In third-quarter 2018, the company opened 26 new stores and relocated one in the United States. The company also opened four new stores in Mexico. As of May 5, the company had 5,540 stores across 50 states in the United States, the District of Columbia and Puerto Rico; 536 in Mexico and 16 in Brazil. The total store count was 6,092 as of May 5.

The company is also putting huge emphasis on its core businesses, as these businesses are immensely lucrative and located in strong markets. The company continues its domestic and overseas expansion efforts by adding around 200 locations annually.

However, AutoZone anticipates capital and operating expenses to rise over the next few years owing to its plans to open distribution centers. Although this investment will be beneficial in the long run, the addition of these distribution centers will lead to higher costs for the company over the next few years. Moreover, it is also investing in the development of mega hub stores.

In the past three months, shares of AutoZone have underperformed the industry it belongs to. During the period, its stock has witnessed a rise of 5.8% in comparison with the industry’s gain of 12.7%.

AutoZone currently carries a Zacks Rank #3 (Hold). Over the past 30 days, both the Zacks Consensus Estimate for the ongoing quarter and full year are tending upwards.

A few better-ranked stocks in the auto space are Oshkosh Corporation (OSK - Free Report) , Allison Transmission Holdings, Inc. (ALSN - Free Report) and Ferrari N.V. (RACE - Free Report) , each sporting a Zacks Rank # 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oshkosh has an expected long-term growth rate of 18.3%. Shares of the company have risen 4.2% over the past year.

Allison Transmission Holdings has an expected long-term growth rate of 10%. Over the past year, shares of the company have gained 11%.

Ferrari has an expected long-term growth rate of 17.3%. Over the past year, shares of the company have gained 66.6%.

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