AutoZone, the automotive parts retailer, has recently seen a significant decline in its stock price following the release of its fourth quarter (Q4) earnings report. The company's financial performance did not meet analyst expectations, leading to a negative market reaction. In this article, we will explore the key financial highlights of AutoZone's Q4 earnings, the implications for investors, and what to expect from the stock moving forward.
Earnings and Revenue
For the quarter ending August 31, 2024, AutoZone reported adjusted earnings per share (EPS) of $48.11. This figure represents a -9.75% surprise compared to the Zacks Consensus Estimate of $53.31 per share. Despite the earnings miss, AutoZone's revenue increased by 9% year-over-year to $6.21 billion, although it fell slightly short of the expected $6.23 billion. Excluding the additional week in this year's quarter, adjusted sales rose by 2.6%.
The modest growth in domestic same-store sales is attributed to continued challenges from deferrals in discretionary merchandise categories. Total company same-store sales increased by 1.3%, while domestic same-store sales grew by only 0.2%.
Profit Margins and Expenses
The gross profit margin decreased by 21 basis points to 52.5%, primarily due to a 53 basis point non-cash LIFO (Last-In, First-Out) impact. Operating expenses as a percentage of sales rose to 31.6% from 31.2% in the previous year.
During the quarter, AutoZone opened 117 new stores, including 68 in the U.S., 31 in Mexico, and 18 in Brazil. The company's domestic commercial sales showed a positive trend, increasing to $1.66 billion from $1.5 billion in the same quarter last year. Sales per average store and sales per average square foot also saw improvements.
Investor Outlook
Given the earnings miss and the current industry conditions, investors should consider two key points.
- The trend in earnings estimate revisions for AutoZone has been unfavorable, leading to a Zacks Rank #4 (Sell) for the stock. This suggests that the shares are expected to underperform the market in the near future.
- The Automotive - Retail and Wholesale - Parts industry, to which AutoZone belongs, is currently in the bottom 10% of the 250-plus Zacks industries. This broader industry performance can have a material impact on AutoZone's stock performance.
Future Expectations
For the coming quarter, the current consensus EPS estimate is $35.89 on $4.35 billion in revenues. For the full fiscal year, the consensus estimate is $162.38 on $18.97 billion in revenues. Investors should monitor how these estimates change following the recent earnings report.
AutoZone shares have fallen in premarket trading, down by approximately 2.7% to 3.73%, following the earnings announcement. Despite this, the stock has gained over 18% in the last 12 months.
Asset Analysis
An analysis of AutoZone's financial performance reveals some key insights:
AutoZone has shown a consistent ability to beat earnings estimates over the past several quarters. For instance, in Q2 of fiscal year 2024, the company reported an EPS of $36.69 against an estimate of $35.96, marking a 2.03% surprise (Source: Yahoo Finance). However, this trend was disrupted in Q4 with a significant miss.
The company has achieved impressive compound annual growth rates (CAGR) in EPS over different time horizons:
· 1-year CAGR: 9.20%
· 3-year CAGR: 12.13%
· 5-year CAGR: 25.61%
Additionally, AutoZone has consistently exceeded EPS estimates over these periods with a rate of 100% (Source: Investing.com).
Conclusion
While AutoZone's Q4 earnings missed expectations, resulting in a decline in its stock price, there are several positive aspects to consider. The company's revenue growth and store expansion efforts indicate potential for future growth. However, investors should remain cautious due to unfavorable earnings estimate revisions and challenges within the broader industry.
Monitoring future earnings estimates and management's commentary will be crucial for understanding AutoZone's stock potential moving forward.
This document was created by Daizy using institutional-grade data and in collaboration with several external Large Language Models. All calculations were performed by the Daizy LLM Analytics Service. The contents of this document do not constitute investment, tax, or legal advice, and Daizy (Vesti.ai Ltd) is not authorized to give any advice. [Please refer to our terms of use.]
