AZO – Tap the Brakes on Autozone Stock

by Louis Navellier | December 9, 2013 11:52 am

Welcome to the Stock of the Day!

AutoZone NYSE:AZO[1]Auto parts giant AutoZone Inc. (AZO[2]) announces first-quarter results Tuesday morning, in what’s sure to be a headline-making announcement.

With the company making inroads into Latin America and opening more stores by the quarter, does Autozone Stock 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 Buzz

AutoZone reports first-quarter earnings before the opening bell tomorrow. And the way things are looking, it’s not going to be a blowout earnings announcement. Currently, the consensus calls for 5.5% annual sales growth and 15.9% earnings growth. That’s well below the 43% earnings growth projected for the industry as a whole.

Further, the analyst community has revised its EPS estimates for AutoZone 10 cents per share lower over the past three months. This suggests that AutoZone could very well miss the consensus earnings estimate in tomorrow’s announcement.

Value Perks

On the bright side, 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. Last summer, 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[3]), which only yields 0.2% and is currently a C-rated hold. 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 Grade[4]r ratings system. AZO has hit the brakes in 2013—this stock has been at a C-rated hold for the past 12 months running. That’s because institutional buying pressure has tapered off for AZO, indicating higher risk relative to potential return. So AZO receives a C 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 for four: Operating margin growth, earnings surprises, earnings revisions and return on equity. However, this is somewhat offset by B-ratings in sales and earnings growth and an A-rating in cash flow, so AZO receives a B for its overall Fundamental Grade.

Bottom Line: As of this posting I consider Autozone stock a C-rated Hold.

  1. [Image]:
  2. AZO:
  3. AAP:
  4. free Portfolio Grade:

Source URL:
Short URL: