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AutoZone (AZO) Q1 earnings preview: Solid performance to keep stock on fast lane

By Staff Correspondent |
earnings preview

After ending the last fiscal year on a positive note, AutoZone (NYSE: AZO) will be publishing first-quarter results on December 10 at 6:55 am ET. The company, a leading distributor of automotive replacement parts, is estimated to have maintained the positive top-line performance in the to-be-reported quarter, aided by stable demand in the domestic market.

AutoZone (NYSE: AZO) said its earnings for the fourth quarter rose to $22.59 per share, compared to $15.02 per share a year ago,

Domestic stores, which account for most of AutoZone’s revenue, will continue to be the key growth-driver. The results are estimated to have particularly benefitted from the expansion of store network and product innovation. The efforts to ensure quick product delivery by streamlining the supply-chain have been paying off.

A Wise Bet

Another factor that gives the retailer an edge over its rivals is the adoption of changing industry trends, with focus on building omnichannel capabilities through technological innovation, such as express delivery and the buy-online-pickup-in-store facility. While helping the company retain and expand the customer base, these factors will also add to sales growth in the to-be-reported quarter.

Related: O’Reilly Automotive (ORLY): Q3 2019 Earnings Snapshot

The company incurred higher operating expenses in three of the four trailing quarters. The trend is expected to have extended into the current fiscal year, dragging the bottom-line growth. Also, AutoZone has been spending heavily on its growth initiatives. Another area of concern is uncertainties in the global economy and higher tariffs due to the US-China trade dispute.

Analysts expect the company’s profit to increase 2% from last year to $13.77 per share in the first three months of fiscal 2020, on revenues of $2.77 billion.

Looking Back

Reflecting an impressive performance by domestic stores, revenues climbed 12% annually to $4 billion in the fourth quarter of 2019 and came in above the forecast. Consequently, earnings surged 50% to $22.59 per share and exceeded the estimates.

Peer Performance

Last month, AutoZone’s rival Advance Auto Parts (AAP) said its third-quarter profit advanced 11% to $2.10 per share on revenues of $2.3 billion, which represents a 2% year-over-year increase. While earnings exceeded the forecast, sales matched.

Also see: AutoZone Earnings Conference Call Transcript

Shares of AutoZone hit a record high last month, after growing steadily for more than two years. The stock gained 43% so far this year.

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