Welcome to the Stock of the Day.
Auto parts giant AutoZone (AZO) announced second-quarter results Tuesday and it was a headline-making announcement. With the latest earnings news hot off the press, does AZO have the green light from me?
Find out today.
Company Overview
AutoZone is the No. 1 auto parts chain in the U.S. AutoZone is a one-stop shop for auto needs. Whether you need a new windshield wiper, tires, brake pads or an exhaust system you can find what you need to repair your vehicle here and for a great price.
With more than 4,800 stores in the U.S. and Puerto Rico there are few places in the country where you can’t find an AutoZone nearby. The company also operates 362 locations and counting in Mexico and three stores in Brazil, bringing the total store count to 5,201.
Earnings Rundown
AutoZone reported $192.83 million in net income on $1.99 billion in net sales. Compared with the year ago quarter this represents 9% bottom-line growth and 9% earnings growth. Adjusted earnings were $5.63 per share, which topped the $5.55 EPS consensus estimate. Notably, U.S. same-store sales rose 4.3% over last year, compared with a 1.7% decline in Q2 2012.
Value Perks
AutoZone is a big proponent of stock buyback programs. Since it began its ongoing share repurchase program in 1998, it has bought back upwards of $13 billion of its own stock. In December the company authorized another $750 million in buybacks. At the same time, the company does not pay a dividend.
Interestingly enough, the only auto parts company that pays a dividend is Advanced Auto Parts (AAP), which only yields 0.2% and is currently an A-rated Buy. So yield seekers may want to look outside of the auto parts industry if they’re looking for added income.
Current Ratings
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. After tapping the brakes for 2013, it looks like AZO has finally hit the gas. The stock has climbed nearly 15% in the past two months.
Currently, AZO is a B-rated buy. That’s because institutional buying pressure has rebounded for AZO, indicating higher return relative to potential risk. So AZO receives an A for its Quantitative Grade.
Meanwhile, AutoZone could stand to improve its fundamentals. Of the eight metrics I graded this company on, it received C-ratings on four: Sales growth, operating margin growth, earnings momentum and return on equity.
This is somewhat offset by B-ratings in earnings growth, analyst earnings revisions and cash flow. AZO receives a C for its overall Fundamental Grade.
Bottom Line: As of this posting I consider AutoZone stock a B-rated Buy.
