On Tuesday, CFRA, a prominent financial research firm, upgraded the price target for AutoZone (NYSE: NYSE:AZO) shares to $3,250 from $3,200, while reaffirming its Buy rating on the stock. This decision follows AutoZone's impressive earnings report for the May quarter, which exceeded market expectations.
AutoZone reported earnings per share (EPS) of $36.69, surpassing the consensus estimate of $36.01 and showing an 8% increase from the $34.12 reported in the same quarter of the previous year. Although the company's revenue was slightly below the consensus, coming in at $4.24 billion, it still represented a 3.7% year-over-year increase.
This revenue figure fell short of the consensus by $60 million, but a robust 1.9% rise in same-store sales and a notable 100 basis points expansion in gross margin to 53.5% helped drive the earnings beat.
The analyst from CFRA highlighted that the earnings beat was mainly due to stronger-than-expected margins. Additionally, AutoZone's international same-store sales saw a significant surge of 18.1%, while domestic same-store sales remained flat.
CFRA raised its EPS estimates for AutoZone to $155.00 for fiscal year 2024 and to $169.25 for fiscal year 2025, up from previous estimates of $154.85 and $168.00, respectively.
AutoZone's consistent performance is underscored by its achievement of surpassing quarterly earnings expectations for the 25th consecutive time. The research firm expressed a positive outlook on AutoZone's strategic share repurchases and the company's strong international growth.
The aging U.S. vehicle fleet, with an average vehicle age of 12.5 years, is also seen as a factor that will likely continue to support domestic same-store sales for AutoZone in the future.
InvestingPro Insights
Following CFRA's optimistic outlook on AutoZone (NYSE: AZO), InvestingPro data corroborates the strength seen in the company's financial performance. AutoZone's market capitalization stands at a robust $50.59 billion, and the company's P/E ratio is 20.01, which is adjusted to 19.3 for the last twelve months as of Q2 2024. This valuation reflects the company's consistent profitability and is supported by a solid revenue growth of 5.57% over the same period.
The company's gross profit margin, an impressive 52.94%, indicates efficient cost management and aligns with the earnings beat driven by strong margins as highlighted by CFRA. Furthermore, AutoZone's operating income margin of 20.6% showcases its operational effectiveness. In terms of stock performance, AutoZone has experienced a 10.21% price total return over the past year, demonstrating a steady appreciation in shareholder value.
InvestingPro Tips suggest that while AutoZone trades at a high P/E ratio relative to near-term earnings growth, the company's stock generally trades with low price volatility, which may appeal to investors looking for stable returns. Additionally, AutoZone's management has been aggressively buying back shares, which can often signal confidence in the company's future prospects. For investors seeking deeper insights, InvestingPro offers additional tips on AutoZone, including analysis of the company's debt levels and liquidity concerns. Interested readers can find further information and tips, including 7 more exclusive InvestingPro Tips for AutoZone, by visiting https://www.investing.com/pro/AZO. To enhance your investment analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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