A BMO Capital Markets analyst on Monday upgraded AutoZone Inc. to "Market Perform" from "Underperform," citing the automotive parts retailer's plans to boost its share buyback program by $500 million.
Rick Weinhart also cited a deal announced Thursday between AutoZone and ESL Investments Inc., which has a 36.2 percent stake in the company.
Under that agreement, if ESL's stake reaches 40 percent of shares outstanding, the hedge fund agreed to vote its shares above that mark in line with other shareholders.
"A more aggressive buyback plan should be accretive to earnings per share and with modestly more financial risk," Weinhart wrote in a note to investors.
"The agreement and history of ESL Investments also leads us to believe ESL would become more active in buying AutoZone if it fell too far below $120."
On the flip side, Weinhart said the deal suggests that the potential for ESL to buy AutoZone looks far less likely in the near future.
AutoZone shares rose $2.09 to $122.22 in afternoon trading.
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