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AutoZone (AZO) Down 26.6% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for AutoZone (AZO). Shares have lost about 26.6% 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 its most recent earnings report in order to get a better handle on the important catalysts.

AutoZone Reports Mixed Q2 Results

AutoZone, Inc. has reported earnings of $12.39 per share in the second quarter of fiscal 2020 (ended Feb 15, 2020), up from the prior-year quarter figure of $11.49. Further, the reported figure surpassed the Zacks Consensus Estimate of $11.87. Net income inched up 1.6% year over year to $299.3 million.

In the reported quarter, net sales increased 2.6% year over year to $2,513.7 million. However, the top line missed the Zacks Consensus Estimate of $2,580 million.

Domestic commercial sales totaled $556.9 million, up from the $514.6 million recorded in the year-ago quarter. Domestic same-store sales (sales at stores open at least for a year) edged down 0.8% year over year.

Gross profit increased to $1,366 million from the prior-year quarter’s $1,325.1 million. Operating profit also went up to $407.9 million from the $400 million registered in the year-ago period.

Store Opening & Inventory

During the fiscal second quarter, AutoZone opened 25 stores in the United States, two in Mexico and one in Brazil. It exited the quarter with 5,815 stores in the United States, 608 in Mexico and 38 in Brazil. The total store count was 6,461 as of Feb 15, 2020.

AutoZone’s inventory improved 7% 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 $713,000, up from the year-ago figure of $690,000.

Financials and Share Repurchases

AutoZone had cash and cash equivalents of $152.97 million as of Feb 15, 2020, down from $195.66 million as of Feb 9, 2019. Total debt amounted to $5,451.5 million, marking an increase from $5,111.2 million as of Feb 9, 2019.

In the fiscal second quarter, AutoZone repurchased 267,000 shares for $314.8 million at an average price of $1,180 per share. At the end of this period, the company had shares worth $962 million remaining in the current repurchase authorization.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, AutoZone has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

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

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