Please ensure Javascript is enabled for purposes of website accessibility

Is AutoZone Speeding Up?

By Michael Lewis - Sep 26, 2013 at 4:53PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The retailer showed decent earnings for the just-ended quarter and concluded a year of stable growth. Are things looking better a few miles down the road?

Vehicle parts and accessories chain AutoZone (AZO 1.27%) saw its profits jump 15% for its fiscal fourth quarter, but the market wanted more. On an adjusted basis, sales nudged forward slightly, and came in below both analyst and internal expectations. In the long run, though, AutoZone continues to grow at an impressive clip amid tepid consumer spending habits. This quarter marks the 28th consecutive quarter of earnings-per-share growth, and management appears bullish on the prospects for the run to continue. Despite its miss, investors seem to be on the side of management, with shares trending up a little more than 1% for the day. With a steady run over the past couple of years, is AutoZone speeding up or slowing down?

Chugging along
The nation's largest auto parts business brought in $10.42 per share based on $371.2 million in net income, according to GAAP numbers. However, excluding one-time items, EPS was less impressive -- $9.76 per share. This is only slightly up from the same quarter last year, when AutoZone earned $8.46 per share. Wall Street was expecting closer to the unadjusted number at $10.34 per share.

Domestic same-store sales figures (up 1% from the year-ago quarter) came in under management's expectations, according to CEO Bill Rhodes.

This quarter concluded a stable, if mild, fiscal year for AutoZone. For the year, sales grew 6.3% to $9.1 billion. Net income gained nearly 10% to $1 billion.

As with many retailers in 2013, management is eager to put the year in the rearview mirror and turn its focus to a faster growing, more hospitable 2014. Management expects things to tick up on both a retail and commercial level in the coming year. Part of the driving factor for top-line sales growth are new locations that opened this year -- 69 in the United States, 21 in Mexico, and two in Brazil.

Overall, things look comfortable for AutoZone, which is actually a more bullish statement than it appears, considering the lackluster performance of nearly every retailer in the country amid poor spending habits and a wishy-washy economy.

Foot on the gas?
At less than 14 times forward earnings and an EV/EBITDA of 9.78, the market expects some decent growth from the company. Pep Boys trades cheaper on an EV/EBITDA basis, but lacks the margins, and profits, that AutoZone seems to have mastered.

The $15 billion AutoZone is a very well-covered, easily modeled company, and the stock price reflects this. While many retailers have taken unfair, macro-level punishment, AutoZone has powered through with few issues. The stock may continue to rise in conjunction with sales and profit growth, but for value hunters, there's no bargain here.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AutoZone, Inc. Stock Quote
AutoZone, Inc.
$2,259.18 (1.27%) $28.35

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.