AutoZone topped earnings and revenue views Tuesday with its first quarter results, even as the wheels have started coming off the used car market. AutoZone stock fell Tuesday.
While prices in the used-car market are dropping fast, after soaring during the pandemic years, AutoZone appears to be so far weathering market pressures.
According to the October Consumer Price Index report, used-car prices have dropped over the past few months. However, they are still 2% higher than last year, and more than 50% higher than they were in February 2020.
The leading aftermarket auto parts business reported both earnings and revenue growth in fiscal Q1 2023 while opening up a number of new locations.
However, AZO's EPS and sales in Q1 did drop compared to Q4 2022. The Memphis, Tennessee-based company has around 6,200 AutoZone stores in the U.S., with more than 700 in Mexico and another 76 in Brazil.
The availability of new and used vehicles throughout the heart of Covid pandemic had been an issue for consumers. In response, many car owners opted for do-it-yourself repairs rather than paying a premium for another car. But recently, inflation and other factors have resulted in many consumers putting off bringing vehicles into a shop.
For most of the last two years, this reality has kept pressure on revenue and earnings growth for aftermarket parts sellers including Advance Auto Parts, O'Reilly Automotive and AutoZone.
However, AutoZone has held up well, with the company beating estimates by healthy margins now in each of the last five quarters.
AutoZone Stock: Earnings
Estimates: Analysts expected EPS of $25.26 on $3.8 billion in revenue in Q1 2023. Wall Street predicted same-store sales edging up 3.7%.
Results: AutoZone reported earnings growing 7% to $27.45 per share in the first quarter. Sales shot up nearly 9% to $3.9 billion while domestic same-store sales increased 5.6%.
Investors appear to have focused on inventory, which the company reported increased 17.6% over the same period last year. This increase was "driven by inflation" and by "growth initiatives," the company said. The company opened 28 new stores in the U.S., three in Mexico and four in Brazil during the quarter.
AutoZone also reported its total auto parts sales grew 8.6% compare to last year while domestic commercial sales shot up 15%.
"We continue to believe our initiatives to grow our business position us well for the remainder of our fiscal year," CEO Bill Rhodes said in a statement Tuesday.
While AutoZone outperformed analyst predictions in Q1, Wall Street forecasts EPS dropping 8% in Q2 to $20.58. Analysts are also expecting revenue to remain mostly flat in Q2 compared to last year.
AutoZone topped earnings estimates in September for the fourth quarter, as the aftermarket auto parts retailer closed out its fiscal year with profit and sales growth.
AZO earnings grew 13% to $40.51 per share in Q4 while sales rose 9% to $5.3 billion. Both marked a slight acceleration from the prior quarter. Same-store sales advanced 6.2%.
In fiscal year 2022, AutoZone earnings grew 23% to $117.19 per share, with revenue up 11% to 16.3 billion. Domestic same-store sales were up 8.4% for the full year.
AZO Stock
AutoZone stock dropped 3% to 2,450.39 Tuesday. AZO shares closed at 2,526.92 Monday.
AutoZone stock has an 91 Composite Rating out of 99. It has a 95 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS rating is 94.
ORLY stock fell 1.6% Tuesday. Shares are not far from highs and are above their 50-day line. AAP stock shed 1.9% Tuesday. Shares are trading down 37% since the beginning of 2022.
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