Stock (Symbol) |
AutoZone, Inc (AZO) |
Stock Price |
$805 |
Sector |
| Food & Necessities |
Data is as of |
| March 24, 2016 |
Expected to Report |
| May 24 – May 31 |
Company Description |
 AZO is a retailer and distributor of automotive replacement parts and accessories in the United States. The Company’s operating segments include Auto Parts Locations and Other. The Auto Parts Locations segment comprises Domestic Auto Parts, Mexico, Brazil and Interamerican Motor Corporation (IMC). The Other segment reflects business activities of three businesses: ALLDATA, E-commerce and AutoAnything. As of August 29, 2015, the Company operated approximately 5,140 AutoZone stores in the United States, including Puerto Rico; over 440 stores in Mexico; approximately seven stores in Brazil, and over 20 IMC branches. The Company’s store carries a product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories and non-automotive products. As of August 29, 2015, in approximately 4,140 of its domestic AutoZone stores, AZO also provides a commercial sales program. Source: Thomson Financial |
Sharek’s Take |
 AutoZone (AZO), the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States, is in the zone right now. The stock is up 8% year-to-date in a stock market that almost crashed then rallied and is around even year-to-date. Investors love the fact AZO keeps pumping out steady double-digit profit growth, which has been either 13% or 14% in each of the last 4 qtrs. Good times look to continue as estimates are for profits to continue to grow average 10% to 14% the next 4 qtrs. The company has also beaten estimates for at least the last 7 qtrs. Management is savvy and buys back lots of stock in addition to building new mega-hubs that support other locations and deliver to stores more than once-a-week, which is boosting sales. The company had a solid 4% rise in same stores sales last qtr, and SSS is a good short-term barometer as to the stock’s direction (in this case up). The company is relatively immune from a strong dollar, as 90% of its stores are in the U.S, as well as the economy as people fix their old cars during recessions. AutoZone is in a zone right now, but that’s taken away some upside in my eyes. The stock sells for 20x earnings now, which is higher than the median P/E has been during each of the last 10 years. My Fair Value on this $805 stock is $779, which is 19x earnings. |
One Year Chart |
 Although I own this stock in the Conservative Portfolio, I’m also looking to add it in the Growth Portfolio. But I want a good price, as AZO has a Est LTG of just 12%, which is below the 15% I like to have in the Growth Portfolio. When the market fell this year I hesitated and didn’t buy more AZO in as the upside didn’t seem great. But with the solid steady growth in qtrly profits along the bottom it’s easy to see why this stock has been a good one this year. |
Fair Value |
 From 1998 to 2014 management has reduced AZO’s share count from 160 million to 30 million due to big stock buybacks, but the EPS growth from buybacks have gone from 15% 2010-2012 to around 5% to 8% now. Also, stock buybacks have been partially done by issuing debt and pushing out payment terms to vendors (accounts payable) and these seem to be maxed out now. I have trouble thinking the stock can be worth more than 20x earnings, but have always underestimated AZO’s success. |
Bottom Line |
 AutoZone has been in the zone for almost a decade now, and with low gasoline prices spurring more long-drives the company might produce low-teens profit growth well into the future. But buybacks aren’t helping as much as they used to, and at 20x earnings I feel the stock is fairly valued here. AZO ranks 15th of 34 stocks in the Conservative Portfolio Power Rankings. I am looking to add it to the Growth Portfolio if it falls to around $700. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 15 of 34 |
