AutoZone Is a Better Investment Than You May Think

by Traders Reserve | September 20, 2012 9:00 am

Auto parts retailer AutoZone (NYSE:AZO[1]) reported earnings on Wednesday, and as you look at the stock and the segment[2] for investment ideas ponder AZO’s results for some insight.

Event: The company announced that it had earned $8.46 per share. Analysts were expecting profits of $8.42 per share. On the revenue side AutoZone generated $2.76 billion in sales falling short of the Street estimate of $2.80 billion.

AutoZone’s CEO noted the disappointment, but said the company was positioned to deliver strong performance going forward. Shares of AutoZone were up on the news, after a tough start in early morning (Wednesday) trading.

Analysis: This marks the second straight quarter of marginal beats on the earnings number for AutoZone. Shares of the company have gained approximately 10% so far this year thanks to what appears to be slowing profit growth.

Margins did tick slightly higher in the fiscal fourth quarter ending August 31, 2012. Analysts are looking for profits to jump by 16% in the current fiscal year ending August 31, 21013. Shares of AutoZone trade for only 13 times forward estimated earnings.

Action: If AutoZone is a core holding, the stock represents a wonderful call option writing opportunity for income generation. The stock is likely to trade higher over the coming year with shares currently slightly undervalued.

  1. AZO:
  2. the stock and the segment:

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