AutoZone posted a surprise earnings gain for its fiscal second quarter early Tuesday, with Advance Auto Parts also beating estimates. AZO stock fell near a buy point, while AAP stock popped.
Auto parts retailer AutoZone's revenue and comparable sales growth beat estimates as well. But growth in average weekly commercial sales per store slowed, on a quarter-over-quarter basis:
"If anything to pick at in results, DIFM (do-it-for-me, or commercial) sales/store/week growth sequentially slowed, while remaining strong" at approximately 8%, Stephens analyst Daniel Imbro wrote in a Feb. 28 note to clients.
"Based on discussions, we believe this could cause investor concern," he added.
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AutoZone Earnings
Estimates: Analysts polled by FactSet expected AutoZone earnings to fall 1.5%, year over year, to $21.96 per share. Revenue was seen rising 5.6% to $3.559 billion for Q2, ended Feb. 11.
Domestic same store sales (SSS), or sales for stores open at least one year, were seen up 4%. That would be on top of a strong 13.8% gain in the year-ago quarter. Commercial sales were seen rising 15.8% with retail sales up 1.9%.
Results: AutoZone earnings grew 10.5% to $24.64. Revenue rose 9.5% to $3.69 billion, picking up from slightly less than 9% in Q1.
Domestic same-store sales increased 5.3%. Commercial sales grew 13.1%, falling short of views, and also below the 14.9% gain seen in Q1.
AutoZone's DIFM or commercial sales suffered at the start of the Covid pandemic in 2020, then rebounded. But, Stephens analyst Imbro wrote March 1, average weekly commercial sales per store "has now slowed for two straight quarters, compared to peer O'Reilly, which has seen sequential increases both quarters."
Outlook: Analysts expect full-year AutoZone earnings per share of $126.91, representing an increase of 8.3%.
AZO Stock
Shares fell 3.3% to 2,486.54 on the stock market today. After a solid rally in February, AZO stock sits just 4% below a 2605.72 cup-with-handle buy point and above a rising 50-day moving average.
The relative strength line for AutoZone stock is trending higher again within a multiyear uptrend.
The Autozone earnings report follows strong results beats from O'Reilly Automotive and Genuine Parts.
"Recent peer results make us increasingly optimistic that AZO can deliver strong earnings Tuesday, buoyed by continued aftermarket inflation, market share wins, and commercial business momentum," Stephens analyst Imbro wrote on Feb. 27, ahead of results.
"ORLY and GPC's recent results reinforced this view," Imbro added. "We believe that AZO's supply chain investments continue to drive higher in-stock and service levels."
Advance Auto Parts Earnings
Estimates: Analysts forecast Advance Auto Parts earnings for the fourth quarter will grow 16.6% to $2.41 per share. Revenue was seen rising 1% to $2.421 billion.
Results: Advance Auto Parts earnings of $2.88 a share, up 39% vs. a year earlier. Revenue grew 2.9% to $2.47 billion, the second straight quarter of very slightly accelerating sales growth.
In addition, the company announced CEO Tom Greco is retiring at year end. Its board has started searching for a replacement.
AAP stock gained 3.1% to 144.96 Tuesday, but hit resistance at the 50-day line. Shares closed up 1.3% to 140.63 Monday, rebounding from the lowest since July 2020.
Among other auto parts retailers, O'Reilly fell 1.9% Tuesday and Genuine Parts eased 0.8%.
