On Wednesday, Raymond James maintained a Strong Buy rating on AutoZone (NYSE:AZO) and increased its price target to $3,400 from the previous $3,100. The adjustment follows the company's financial results for the second quarter of fiscal year 2024.
The firm's decision comes after a review of AutoZone's recent F2Q24 performance and subsequent discussions. The analyst highlighted the company's solid earnings before interest and taxes (EBIT) percentage and earnings per share (EPS) as outperforming expectations, despite relatively flat comparable store sales in the do-it-yourself (DIY) segment.
AutoZone's long-term prospects appear to be supported by various strategic initiatives. The company plans to double its mega hub locations to 200 in the near term, which is expected to drive market share gains in both the DIY and do it for me (DIFM) segments. Investments in information technology and selling, general and administrative expenses (SG&A) are anticipated to enhance delivery times.
The analyst also noted optimism regarding AutoZone's commercial business. While there are areas that require further development, there was an observable acceleration in this segment towards the end of the period, contrasting with a mid-quarter slowdown.
The expectation is that this momentum will continue to build in the upcoming quarters, particularly as more mega hub locations are opened.
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