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AutoZone (AZO) Down 2.2% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for AutoZone, Inc. (AZO - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
AutoZone Earnings, Revenues Miss Estimates in Q2
AutoZone reported 8.8% year-over-year growth in earnings per share to $8.08 for second-quarter fiscal 2017 (ended Feb 11, 2017) from $7.43 recorded in the year-ago quarter. Earnings missed the Zacks Consensus Estimate of $8.20. Moreover, net income climbed 3.7% to $237.1 million from $228.6 million a year ago.
Quarterly revenues improved 1.4% year over year to $2.29 billion in the reported quarter. However, the figure lagged the Zacks Consensus Estimate of $2.35 billion. Domestic same-store sales (sales for stores open at least for one year) were flat in the quarter.
Gross profit rose to $1.21 billion (or 52.7% of sales) from $1.19 billion in the prior-year quarter. The decline was due to higher shrink expense and supply chain costs, partly offset by lower acquisition costs.
Operating profit improved to $384 million from $382.7 million recorded in the second quarter of fiscal 2016. Operating expenses, as a percentage of sales, rose to 35.9% from 35.8% a year ago. Operating expenses margin rose due to higher domestic store payroll in the reported quarter, partly offset by lower incentive compensation.
Store Opening & Inventory
AutoZone opened 33 stores in the U.S., three stores in Mexico and one in Brazil. As of Feb 11, the company had 5,346 stores across 50 states, the District of Columbia and Puerto Rico in the U.S., 491 stores in Mexico, nine stores in Brazil and 26 Interamerican Motor Corp. (IMC) branches. Thus, the total store count was 5,872 as of that date.
AutoZone’s inventory grew 8.7% year over year in the quarter, driven by store openings and increased product placement. Inventory per store increased to $665,000 from the year-ago level of $633,000.
Share Repurchases
In second-quarter fiscal 2017, AutoZone repurchased 256,000 shares for $198 million, reflecting an average price of $773 per share. The company had shares worth $585 million remaining for repurchase at the end of the quarter.
Financial Details
AutoZone had cash and cash equivalents of $210.6 million as of Feb 11, 2017, up from $208 million as of Feb 13, 2016. Total debt amounted to $5.15 billion as of Feb 11, 2017, compared with $4.85 billion as of Feb 13, 2016. The company had a stockholders’ deficit of $1.83 billion as of Feb 11, 2017, up from $1.74 billion as of Feb 13, 2016.
During the first half of fiscal 2017, AutoZone generated net cash flow of $355.9 million before share repurchases and changes in debt, compared with $364.2 billion in the first half of fiscal 2016. Capital spending increased to $216.1 million from $186.6 million a year ago.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been five downward revisions for the current quarter compared to four upward.
At this time, AutoZone's stock has an average Growth Score of 'C', a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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AutoZone (AZO) Down 2.2% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for AutoZone, Inc. (AZO - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
AutoZone Earnings, Revenues Miss Estimates in Q2
AutoZone reported 8.8% year-over-year growth in earnings per share to $8.08 for second-quarter fiscal 2017 (ended Feb 11, 2017) from $7.43 recorded in the year-ago quarter. Earnings missed the Zacks Consensus Estimate of $8.20. Moreover, net income climbed 3.7% to $237.1 million from $228.6 million a year ago.
Quarterly revenues improved 1.4% year over year to $2.29 billion in the reported quarter. However, the figure lagged the Zacks Consensus Estimate of $2.35 billion. Domestic same-store sales (sales for stores open at least for one year) were flat in the quarter.
Gross profit rose to $1.21 billion (or 52.7% of sales) from $1.19 billion in the prior-year quarter. The decline was due to higher shrink expense and supply chain costs, partly offset by lower acquisition costs.
Operating profit improved to $384 million from $382.7 million recorded in the second quarter of fiscal 2016. Operating expenses, as a percentage of sales, rose to 35.9% from 35.8% a year ago. Operating expenses margin rose due to higher domestic store payroll in the reported quarter, partly offset by lower incentive compensation.
Store Opening & Inventory
AutoZone opened 33 stores in the U.S., three stores in Mexico and one in Brazil. As of Feb 11, the company had 5,346 stores across 50 states, the District of Columbia and Puerto Rico in the U.S., 491 stores in Mexico, nine stores in Brazil and 26 Interamerican Motor Corp. (IMC) branches. Thus, the total store count was 5,872 as of that date.
AutoZone’s inventory grew 8.7% year over year in the quarter, driven by store openings and increased product placement. Inventory per store increased to $665,000 from the year-ago level of $633,000.
Share Repurchases
In second-quarter fiscal 2017, AutoZone repurchased 256,000 shares for $198 million, reflecting an average price of $773 per share. The company had shares worth $585 million remaining for repurchase at the end of the quarter.
Financial Details
AutoZone had cash and cash equivalents of $210.6 million as of Feb 11, 2017, up from $208 million as of Feb 13, 2016. Total debt amounted to $5.15 billion as of Feb 11, 2017, compared with $4.85 billion as of Feb 13, 2016. The company had a stockholders’ deficit of $1.83 billion as of Feb 11, 2017, up from $1.74 billion as of Feb 13, 2016.
During the first half of fiscal 2017, AutoZone generated net cash flow of $355.9 million before share repurchases and changes in debt, compared with $364.2 billion in the first half of fiscal 2016. Capital spending increased to $216.1 million from $186.6 million a year ago.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been five downward revisions for the current quarter compared to four upward.
AutoZone, Inc. Price and Consensus
AutoZone, Inc. Price and Consensus | AutoZone, Inc. Quote
VGM Scores
At this time, AutoZone's stock has an average Growth Score of 'C', a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.