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Why Is AutoZone (AZO) Up 14% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for AutoZone, Inc. (AZO - Free Report) . Shares have added about 14% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is AZO 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 catalysts.

AutoZone’s Q3 Earnings Beat Estimates, Revenues Miss

AutoZone reported earnings of $13.42 per share in the third quarter of fiscal 2018 (ended May 5, 2018), beating the Zacks Consensus Estimate of $12.99. The figure was $11.44 in third-quarter fiscal 2017.

Revenues improved 1.6% year over year to $2.66 billion in the reported quarter. However, the figure missed the Zacks Consensus Estimate of $2.71 billion. Domestic same-store sales (sales of stores open at least for a year) rose 0.6% year over year.

Gross profit increased to $1.42 billion from $1.38 billion in the prior-year quarter. Operating profit (EBIT) rose to $545.8 million from $529.6 million registered in the third quarter of fiscal 2017.

Operating expenses, as a percentage of sales, increased to 33% from 32.4% a year ago.

Store Opening & Inventory

During the reported quarter, AutoZone 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 that date.

AutoZone’s inventory improved 3.7% year over year in the quarter under review, driven by store openings and increased product placement, partially offset by the sale of two business units.
Inventory per location increased to $658,000 from the year-ago figure of $653,000.

Share Repurchases

In the third quarter of fiscal 2018, AutoZone repurchased 599,000 shares for $400 million, reflecting an average price of $667 per share. The company had shares worth $897 million remaining for repurchase at the end of the fiscal third quarter.

Financial Details

AutoZone had cash and cash equivalents of $218.4 million as of May 5, 2018, down from $227.1 million as of May 6, 2017. Total debt amounted to $4.95 billion as of May 5, 2018, compared with $5.15 billion as of May 6, 2017.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter compared to two lower.

AutoZone, Inc. Price and Consensus

 

VGM Scores

At this time, AZO has a nice Growth Score of B, however its Momentum is doing a bit better with an A. Following the exact same course, the stock was also allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Based on our scores, the stock is equally suitable for value and momentum investors than growth investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, AZO has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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