AutoZone (AZO) To Report Q4 Earnings: Is A Beat In Store?

AutoZone, Inc. (NYSE:AZO) is slated to report fourth-quarter fiscal 2017 (ended Aug 26, 2017) results on Sep 19, before the market opens.

The company earnings grew year over year but missed the Zacks Consensus Estimate last quarter. AutoZone delivered a negative average earnings surprise of 1.5% in the trailing four quarters. AutoZone has a long-term growth rate of 11.7%.

Last month, AutoZone shares have outperformed the industry it belongs to. The company shares have gained 10.2% compared with the industry’s growth of 7.1%.

Let’s see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that AutoZone is likely to beat estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to beat estimates, and AutoZone has the right mix.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of $15.26 and the Zacks Consensus Estimate of $15.11, is +0.98%. This is a leading indicator of a likely positive surprise.

Zacks Rank: AutoZone’s Zacks Rank #3, when combined with a positive ESP, makes us reasonably confident of an earnings beat this time around.

What's Driving the Better-than-Expected Earnings?

AutoZone utilizes cash flow for opening new stores every year and aggressively repurchases shares. In the first nine months of fiscal 2017, AutoZone opened 84 stores in the United States, 16 stores in Mexico and one in Brazil. Additionally, it relocated four stores in the United States. The company plans to open another 70 domestic stores in the fiscal fourth quarter. This is likely to have some positive impact on fourth-quarter 2017 results.

The company has ample liquidity to repurchase shares without compromising financial strength and therefore, its credit ratings. In the third quarter of fiscal 2017, AutoZone bought back 396,000 shares for $284 million at an average price of $716 per share. It had shares worth $1.05 billion to be repurchased at the end of the quarter. The company is focused on enhancing shareholder returns, while simultaneously maintaining adequate liquidity for its business strategies.

Stocks to Consider

A few better-ranked automobile stocks are Toyota Motor Corporation (NYSE:TM) , Daimler AG (OTC:DDAIF) and Volkswagen (DE:VOWG_p) AG (OTC:VLKAY) . While Toyota and Daimler sport a Zacks Rank #1 (Strong Buy), Volkswagen carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Toyota has a long-term growth rate of 7%.

Daimler has an expected long-term earnings growth rate of 2.8%

Volkswagen has an expected long-term earnings growth rate of 8.9%

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