Should You Get In The Zone With Autozone?

If you looked up the phrase "steady growth" in the dictionary, you might see a picture of the last 29 earnings reports for AutoZone (NYSE: AZO  ) . While the company isn't growing as fast as O'Reilly Automotive (NASDAQ: ORLY  ) on a percentage basis, its consistent quarterly gains are rewarding shareholders and this has come at the expense of competitors such as Advance Auto Parts (NYSE: AAP  ) .

AutoZone results
AutoZone reported its fiscal first-quarter results on Dec. 10. Net sales climbed 5.1% to $2.09 billion. Same-store sales inched up 0.9%. Net income jumped 7.2% to $14.6 million while diluted earnings per share rocketed 16.2% to $6.29. It was the 29th quarter in a row of double-digit earnings per share gains.

This was very similar to the sequential quarter just prior when AutoZone posted a sales gain of 5.6%, a same-store sales gain of 1%, a net income gain of 7.4%, and an EPS gain of 15.4%. AutoZone has a long track record of delivering.

During the most recent quarter, the company bought back $292 million worth of stock. It has $177 million left under its current buyback program. Look for an announcement that expands the buyback program.

CEO Bill Rhodes expects the earnings growth to continue due to "several strategic fronts." AutoZone is expanding and updating its inventory. It opened up over 100 new commercial programs in the quarter and rolled out a new version of its electronics catalog, which has already begun to bear fruit in terms of increased sales.

Conference call
In the call, Rhodes credited the successful quarter to the consistency of the industry and AutoZone's business model as the company made investments in technology to improve its customer service and its operating efficiency. In 2014, his goal is taking more market share from competitors while growing AutoZone's earnings.

Rhodes pointed out that while the economy and the government shutdown were headwinds in the quarter, lower gas prices were a tailwind. This is because lower gas prices meant more driving and thus more parts needed as a result of increased wear and tear. He believes gas prices will be even lower in the winter months ahead, and AutoZone will benefit. While there's no such thing as a sure thing for any company, it's difficult to find things to criticize about AutoZone's results and outlook.

O'Reilly Automotive
If you had to pick a concern, O'Reilly Automotive as competition might be it. Nobody likes to be in second place, and O'Reilly Automotive potentially threatens to grow bigger than AutoZone someday. Its sales and profit are smaller than those of AutoZone, but O'Reilly Automotive has been growing more quickly. Last quarter, O'Reilly Automotive's sales leaped 8% to $1.73 billion and same-store sales jumped 4.6%. CEO Greg Henslee said that the same-store sales jump was "industry leading."

Advance Auto Parts
Meanwhile, Advance Auto Parts appears to be slipping and losing market share, likely to AutoZone and O'Reilly Automotive. Last quarter, Advance Auto Parts did report a 4.3% sales pop, but that was mostly from opening new stores. Its same-store sales slid 2%. The company blamed the economy and warned that it expects the weakness to continue for at least another quarter. Advance Auto Parts also noted an interesting statistic: 80% of new auto parts store openings from competitors over the last 12 months have been within the "footprint" of an Advance Auto Parts store. This suggests that companies such as AutoZone and O'Reilly Automotive are taking Advance Auto Parts head on and seeing some success from doing so.

Foolish final thoughts
AutoZone has steadily and consistently grown sales, same-store sales, and earnings. While its growth has not been as rapid as what O'Reilly Automotive has seen lately, there's an advantage in that investors don't have to worry as much about potential growing pains and challenges that can come when a company grows too fast. Some companies will hit a brick wall if they grow too fast, unable to effectively manage the logistics behind that growth. For Fools looking for a steady riser with a history of manageable increases in sales and profits every quarter for years, AutoZone deserves a look.

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