AutoZone (AZO) Up 8.2% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for AutoZone (AZO). Shares have added about 8.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AutoZone due for a pullback? 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 drivers.

AutoZone Q1 Earnings Surpass, Sales Lag Estimates

AutoZone reported diluted earnings of $18.61 per share for the first quarter of fiscal 2021 (ended Nov 21, 2020), up from the prior-year figure of $14.3. The bottom line also surpassed the Zacks Consensus Estimate of $17.72. Higher-than-expected comparable sales growth led to this outperformance. Net income climbed 26.3% year over year to $442.4 million. Net sales also increased 12.9% year over year to $3,154.3 million. The top line, however, marginally missed the Zacks Consensus Estimate of $3,164 million.

For the reported quarter, domestic commercial sales totaled $695.3 million, up from the $621.5 million recorded in the year-ago quarter. The figure, however, lagged the consensus mark of $721 million. Nonetheless, domestic same-store sales (sales at stores open at least for a year) grew 12.3% year over year, outpacing the Zacks Consensus Estimate of 11.37%.

Gross profit increased to $1,675.6 million from the prior-year quarter’s $1,501.1 million. Operating profit also surged to $615.2 million from the $500 million registered in the year-ago period.

Store Opening & Inventory

During the fiscal first quarter, AutoZone opened 39 stores in the United States and two in Brazil. It exited the quarter with 5,924 stores in the United States, 621 in Mexico and 45 in Brazil. Total store count was 6,590 as of Nov 21, 2020.

AutoZone’s inventory improved 3.7% year over year in the reported quarter on store openings and increased product placement. At the end of the quarter, inventory per location was $702,000, up from the year-ago figure of $694,000.

Financials and Share Repurchases

AutoZone had cash and cash equivalents of $1,664 million as of Nov 21, 2020, up from $158.1 million as of Nov 23, 2019. Total debt amounted to $5,514.9 million as of Nov 21, 2020, marking an increase from the $5,287.3 million on Nov 23, 2019.

For the fiscal first quarter, AutoZone repurchased 584,379 shares for $678.3 million at an average price of $1,161 per share. The company has shares worth $117.6 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 estimates review. The consensus estimate has shifted -5.24% due to these changes.

VGM Scores

At this time, AutoZone has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.

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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