Can High Commercial Sales Boost AutoZone (AZO) Q4 Earnings?

AutoZone, Inc. (NYSE:AZO) is slated to report fourth-quarter fiscal 2019 results on Sep 24, before the market opens. The current Zacks Consensus Estimate for the quarter to be reported is a profit of $21.64 on revenues of $3.94 billion.

The automotive aftermarket parts and accessories retailer came up with better-than-expected results in the last reported quarter on the back of improved performances of DIY (Do it Yourself) and DIFM (Do It For Me) businesses. Markedly, the bottom line increased 10.7% year over year.

As far as earnings surprises are concerned, CarMax — whose peers include Advance Auto Parts, Inc. (NYSE:AAP) , O'Reilly Automotive, Inc. (NASDAQ:ORLY) and CarMax, Inc. (NYSE:KMX) among others — is on an excellent footing, having surpassed the Zacks Consensus Estimate in each of the last four quarters, with average of 8.56%.

Investors are keeping their fingers crossed and hoping that the company can continue winning ways by topping earnings estimates this time around too. However, our model indicates that AutoZone might not beat on earnings in the to-be-reported quarter.

Which Way are Top and Bottom-Line Estimates Trending?

The Zacks Consensus Estimate for fiscal fourth-quarter earnings per share has been downwardly revised by 10 cents in the past seven days to $21.64. However, this indicates an improvement from the year-ago reported earnings of $18.54 per share. The Zacks Consensus Estimate for revenues is pegged at $3,941 million, suggesting an improvement from $3,559 million reported in the prior-year quarter.

Factors at Play

AutoZone’s fast delivery of high-quality products is expected to drive fourth-quarter fiscal 2019 results. In addition to growing physical presence through store openings, emerging presence on its online platform is likely to add customers for DIY retail and commercial businesses. This is a positive for the quarter to be reported. The firm expects to witness growth in the to-be-reported quarter, aided by fast deliveries, high-quality products and store merchandising.

Notably, its store count at the end of the fiscal fourth quarter is expected to be 6,403, implying growth from 6,202 in the year-ago quarter. Also, AutoZone’s initiatives to expand and develop the supply-chain network are likely to lead to sales growth. Notably, the Zacks Consensus Estimate for total domestic commercial sales is pegged at $897 million, which suggests increase of 22.5% and 45.8% on a yearly and sequential basis, respectively.

While the company is expected to benefit from higher sales, increased operating expenses amid opening of distribution centers, mega hubs and stores, along with technology investments may partially offset the positives in the quarter to be reported.

What Our Model Says

Our proven model does not conclusively predict that AutoZone will beat the Zacks Consensus Estimate in the quarter to be reported. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

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

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%.

Zacks Rank: AutoZone currently has a Zacks Rank #3 (Hold). While a Zacks Rank #3 boosts optimism, its 0.00% ESP makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell Rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

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