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Why Is AutoZone (AZO) Down 7.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for AutoZone (AZO - Free Report) . Shares have lost about 7.8% in that time frame, underperforming the S&P 500.

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

AutoZone Earnings & Revenue Surpass Estimates in Q1

AutoZone, Inc. has reported earnings of $14.30 per share in the first quarter of fiscal 2020 (ended Nov 23, 2019), up from the prior-year quarter’s figure of $13.47. Further, the figure surpassed the Zacks Consensus Estimate of $13.69. Net income edged down 0.3% year over year to $350.3 million.

In the reported quarter, net sales increased 5.7% year over year to $2,793 million. The top line also beat the Zacks Consensus Estimate of $2,760.7 million.

Domestic commercial sales totaled $621.5 million, up from the $546.9 million recorded in the year-ago quarter. Domestic same-store sales (sales at stores open at least for a year) were up 3.4% year over year, driven by improved performances of DIY and commercial businesses.

Gross profit increased to $1,501.1 million from the prior-year quarter’s $1,417.4 million. Operating profit also went up to $500 million from the $487.8 million registered in the year-ago period.

Store Opening & Inventory

During the reported quarter, AutoZone opened 18 stores in the United States, two in Mexico and two in Brazil. It exited the quarter with 5,790 stores in the United States, 606 in Mexico and 37 in Brazil. The total store count was 6,433 as of Nov 23.

AutoZone’s inventory improved 9.1% year over year in the reported quarter, aided by store openings and increased product placement. At the end of the quarter, inventory per location was $694,000, up from the year-ago figure of $658,000.

Financials and Share Repurchases

AutoZone had cash and cash equivalents of $158 million as of Nov 23, 2019, down from $252 million as of Nov 17, 2018. Total debt amounted to $5,287.3 million, marking an increase from $5,156 million as of Nov 17, 2018.

In the fiscal first quarter, AutoZone repurchased 403,000 shares for $450 million at an average price of $1,116 per share. At the end of this period, the company had shares worth $1.3 billion remaining in the current repurchase authorization.

Outlook

The company expects to meet or exceed customer needs across all channels, backed by its initiatives to improve inventory availability and drive DIY sales. AutoZone is also aimed at boosting its operating earnings and cash flow, and utilize its balance sheet and capital effectively.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, AutoZone has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise AutoZone has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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