AutoZone, Inc. (NYSE: AZO) looks poised for a strong start to the second half of FY25, with anticipated sales and earnings growth in the third quarter. The company’s growth strategy is focused on investing in technology and expanding its commercial business, as it navigates challenges like rising competition and cost pressure from new import tariffs. While the business is relatively resilient to inflation-induced strain on consumer spending, a broader pullback on discretionary purchases could affect segments like DIY.
Q3 Report Due
When the Memphis-headquartered auto parts retailer reports third-quarter results on Tuesday, May 27, before the opening bell, Wall Street will be expecting earnings of $36.98 per share, representing a modest increase from the prior-year quarter when it earned $36.69 per share. Q3 sales are expected to grow 4.1% from last year to $4.41 billion. Interestingly, AutoZone has consistently beaten quarterly earnings estimates for about two years.
AZO is among the more expensive Wall Street stocks, with a 12-month average value of around $3,243. Last month, the shares reached a new high after staying in an upward spiral for several months. Analysts are quite bullish on the stock’s prospects and the majority of them recommend buying it, as per latest estimates. It has registered an impressive 24% growth in the past six months alone.
The Stock
The company has regularly reduced its share count, nearly halving the number of outstanding shares in the past ten years. The stock has a strong track record of effectively navigating broader market headwinds. During economic uncertainties, aftermarket auto parts sales typically increase as customers tend to repair and maintain their existing vehicles rather than purchasing new ones, which makes AutoZone a relatively safe investment option.
“While we have continued to see wide variations in performance across the more rather sensitive markets, we remain confident in our initiatives. We are very encouraged with our improved satellite store inventory availability, significant improvements in Hub and Mega-Hub stores coverages, the strength of our Duralast brand, and good execution on our initiatives to improve speed of delivery and improve cost service, which gives us confidence as we move throughout the year,” AutoZone CEO Philip Daniele said at the Q2 earnings call.
In Q2 FY25, AutoZone’s net income decreased to $487.9 million or $28.29 per share from $515.03 million or $28.89 per share in the corresponding period of 2024. Meanwhile, second-quarter sales increased to $3.95 billion from $3.86 billion in the prior year quarter. Domestic same-store sales, or sales at stores open at least one year, rose 1.9%, continuing the recovery that started a year ago. The results surpassed market watchers’ projections.
Expansion Mode
Encouraged by the solid sales performance in the international market, with a 9.5% growth in same-store sales on a constant currency basis, the management maintains its focus on opening more stores in overseas markets. At the same time, domestic sales continue to benefit from strong performance in the DIY and commercial segments. AutoZone has delivered stable margin performance in the past and stayed consistently profitable.
AutoZone’s stock is currently hovering near last month’s all-time highs. On Monday, it opened at $3,786.42 and was trading up 2% in the afternoon.