AutoZone, Inc. Earnings: How Lampert's Other Famous Pick Has Crushed Sears Holdings

Next Tuesday, AutoZone (NYSE: AZO  ) will release its quarterly report, and investors fully expect the auto-parts stock to keep soaring. The stock was a big success story for well-known investor Eddie Lampert, whose efforts at Sears Holdings (NASDAQ: SHLD  ) have been much less productive from an investment-profit standpoint. But even after Lampert sold off his stake in AutoZone in 2012, the company has kept growing despite competition from Advance Auto Parts (NYSE: AAP  ) and other big players in the auto-parts industry.

AutoZone stock has moved almost straight up for more than a decade, as even the major recession of 2008 only bolstered its business model of helping car-owners extend the operating lives of their vehicles. In particular, even though Lampert has had only mixed success at Sears, his efforts to accelerate AutoZone's growth were hugely successful, and the stock has tripled since 2010. Yet with Advance Auto Parts and other companies vying for competitive supremacy in auto parts and related services, AutoZone has to keep finding ways to hold onto its customers. Let's take an early look at what's been happening with AutoZone over the past quarter and what we're likely to see in its report.


Source: Ildar Sagdejev, via Wikimedia Commons

Stats on AutoZone

Analyst EPS Estimate

$8.44

Change From Year-Ago EPS

16.1%

Revenue Estimate

$2.33 billion

Change From Year-Ago Revenue

5.8%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Will AutoZone earnings drive forward this quarter?
Analysts have been mildly optimistic about AutoZone earnings recently, adding $0.03 per share to their May-quarter views and raising full-year fiscal 2014 and 2015 projections modestly as well. The stock has plateaued, rising just 1% since mid-February.

AutoZone's fiscal second-quarter results showed the continuing growth trajectory that AutoZone has taken even without Lampert's direction. Same-store sales rose 4.3%, pushing overall revenue up more than 7%, and adjusted earnings rose almost 18%. The tough winter was actually helpful for AutoZone, as customers needed more parts because of the harsh conditions.

Source: Dvortygirl, via Wikimedia Commons

But one question AutoZone needs to answer is whether it will get into the business of auto repair. Sears Holdings has long seen its Sears Auto Center unit as a valuable asset and a potential spinoff candidate, and Advance Auto Parts has recently made moves to buy a chain of repair shops that could represent its entry into the space. As vehicles get more sophisticated, do-it-yourself repairs become more difficult, and AutoZone will have to address whether to help owners directly or bolster its relationships with third-party service centers. Right now, AutoZone's commercial market share is tiny, despite efforts to add new commercial sales programs and bolster their effectiveness.

For now, though, AutoZone appears focused on building up its multichannel capability. After acquiring AutoAnything a year and a half ago, AutoZone has worked at boosting its e-commerce business, which has been an important complement to its impressive store count. Even though some shareholders are disappointed that AutoZone stock hasn't kept up with Advance Auto Parts and other industry rivals, trends that have car owners holding onto their vehicles longer haven't reversed themselves even as the economy has recovered. That's good news for the industry as a whole.

In the AutoZone earnings report, watch to see how well the company does in its growth efforts in various directions. If the company can keep firing on all cylinders, then AutoZone will make Eddie Lampert annoyed that he didn't spend more time hanging onto his AutoZone shares and less time on Sears Holdings.

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Related Tickers

10/1/2014 12:45 PM
AAP $130.91 Up +0.61 +0.47%
Advance Auto Parts… CAPS Rating: ****
AZO $511.00 Up +1.34 +0.26%
AutoZone CAPS Rating: ***
SHLD $25.28 Up +0.05 +0.20%
Sears Holdings CAPS Rating: *

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