AutoZone Stocks Gained $200 after Q4 Earnings

AutoZone, Inc. is a leading retailer and distributor of automotive replacement parts and accessories in the United States. Founded over 43 years ago, AutoZone has grown significantly and now operates more than 6,300 stores across the U.S., Puerto Rico, Mexico, and Brazil.

The company is known for its commitment to providing high-quality parts, competitive prices, and excellent customer service. AutoZone offers a wide range of products, including batteries, brakes, engine oil, filters, and various car accessories. They also provide DIY repair advice and free next-day delivery on eligible items

AutoZone Fiscal Q4 2024

AutoZone recently released its Q4 2024 earnings report. Here are the key highlights:

• Net Sales: $6.2 billion, up 9% from the same period last year.
• Same-Store Sales: Increased by 0.7%.
• Net Income: $902.2 million, compared to $864.8 million in the same period last year.
• Earnings Per Share (EPS): Increased by 11% year-over-year to $51.58.

For the fiscal year ending August 31, 2024:

• Total Sales: $18.5 billion, an increase of 5.9% from the prior year.
• Gross Profit Margin: 53.1%, up from 52.0% last year.
• Operating Profit: Increased by 9.1% to $3.8 billion.
• Net Income: $2.7 billion, up 5.3%.
• Diluted EPS: $149.55, up 13% from $132.36 last year.

However, AutoZone missed both earnings and revenue forecasts for Q4 2024. Despite reporting a 9% increase in net sales to $6.2 billion, this fell short of analyst expectations. Similarly, their earnings per share (EPS) of $51.58, while up 11% year-over-year, also missed the forecast.

AutoZone also repurchased 244,000 shares of its common stock during the fourth quarter, at an average price of $2,915 per share, totaling $710.6 million. Also, the company did not declare any dividends, focusing instead on share repurchases and reinvestment in the business.

Future Outlook

AutoZone plans to continue expanding its store footprint, enhancing its digital capabilities, and investing in supply chain efficiencies. Also, the company expects steady demand for automotive parts and services, driven by an aging vehicle fleet and increased miles driven.

For the upcoming Q1 2025, AutoZone has provided the following guidance:

• Earnings Per Share (EPS): The estimate is $20.25
• Revenue: Expected to be around $3.5 billion

AutoZone’s management remains optimistic about their growth prospects, focusing on expanding their store footprint, enhancing digital capabilities, and maintaining operational efficiency despite the competitive landscape and economic challenges

AutoZone’s Board Statement

During the Q4 2024 earnings call, AutoZone’s CEO, Phil Daniele, highlighted the company’s strong performance, noting a 9% increase in net sales and an 11% rise in EPS despite economic challenges. He emphasized the significant growth in international same-store sales, which rose by 9.9%, and the opening of 49 new stores internationally. Daniele also discussed ongoing investments in technology to enhance supply chain efficiency and customer experience. However, he acknowledged a 1% decline in domestic DIY sales, attributing it to reduced discretionary spending and stressing the need to adapt to changing consumer behaviors. Looking ahead, he expressed confidence in AutoZone’s strategic direction, focusing on market expansion, digital enhancements, and operational efficiency.

Impact of Earning on Stock

AutoZone (AZO) shares fell by 2.7% in premarket trading following the earnings release but then the stock price surged 7%. The decline was primarily due to the earnings missing analyst expectations despite the overall positive growth in sales and EPS.

Analysts have mixed reactions. While some appreciate the strong sales growth and international expansion, others are concerned about the decline in domestic DIY sales and the impact of currency headwinds.

However, investors are particularly focused on the company’s ability to maintain growth in the face of economic pressures and competitive challenges. The decline in domestic DIY sales and the impact of inflation on consumer spending are key areas of concern.

Technically, the stock has bounced back after reaching the upward trendline. 

Positive Highlights

• International Growth: AutoZone’s international same-store sales increased by 9.9%, indicating strong performance outside the U.S. This has been a positive highlight for investors looking at the company’s global expansion strategy.
• Operational Efficiency: Despite the challenges, AutoZone managed to improve its gross profit margin and operating profit, showcasing effective cost management and operational efficiency.

Challenges

• Domestic DIY Sales: The domestic DIY segment saw a decline of about 1%, driven by a decrease in discretionary merchandise categories2. This has raised concerns about consumer spending behavior and competition from other retailers.
• Currency Headwinds: The company faced significant currency headwinds, impacting reported sales, operating profit, and EPS.

Overall, while AutoZone’s Q4 2024 earnings report showed strong growth in several areas, the market’s reaction reflects a cautious outlook due to specific challenges and missed expectations.