How Has AZO Performed 30 Days Post Earnings

A month has gone by since the last earnings report for AutoZone (NYSE:AZO). Shares were flat in that time frame, underperforming the S&P 500.

Will the recent 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 its most recent earnings report in order to get a better handle on the important drivers.

AutoZone Earnings Surpass Estimates in Q4, Up Y/Y

AutoZone reported earnings of $22.59 per share in the fourth quarter of fiscal 2019 (ended Aug 31, 2019), up from $15.02 in the prior-year period. Further, the figure surpassed the Zacks Consensus Estimate of $21.64. Net income rose 41.2% year over year to $565.2 million, benefitting from lower effective income tax rate.

In the reported quarter, net sales improved 12% year over year to $3,988.4 million. The top line also beat the Zacks Consensus Estimate of $3,940 million.

Domestic commercial sales totaled $886.5 million, up from $731.8 million in the year-ago quarter. Domestic same-store sales (sales at stores open at least for a year) rose 3% year over year, driven by improved performances of DIY and commercial businesses.

Gross profit increased to $2,130.4 million from $1,907.8 million in the prior-year quarter. Operating profit also rose to $780.7 million from $591.3 million registered in the year-ago period.

Store Opening & Inventory

During the quarter ended Aug 31, 2019, AutoZone opened 86 stores in the United States, of which 28 were in Mexico and 10 in Brazil. As of the same date, it had 5,772 stores across 50 states in the United States, the District of Columbia and Puerto Rico; 604 in Mexico; and 35 in Brazil. The total store count was 6,411 as of Aug 31.

AutoZone’s inventory improved 9.5% year over year in the quarter under review, driven by store openings and increased product placement. At the end of the quarter, inventory per location increased to $674,000 from the year-ago figure of $636,000.

Financials and Share Repurchases

AutoZone had cash and cash equivalents of $176 million as of Aug 31, 2019, down from $217 million on Aug 25, 2018. Total debt amounted to $5,206.3 million, marking an increase from $5,006 million on Aug 25, 2018.

In the fourth quarter of fiscal 2019, AutoZone repurchased 634,000 shares for $692 million at an average price of $1,091 per share. At the end of the quarter, the company had shares worth $476.8 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 strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.