Stock (Symbol) |
AutoZone, Inc (AZO) |
Stock Price |
$712 |
Sector |
| Food & Necessities |
Data is as of |
| January 10, 2016 |
Expected to Report |
| Mar 1 – 7 |
Company Description |
 AutoZone, Inc. (AutoZone) is a retailer and a distributor of automotive replacement parts and accessories in the United States. The Company’s segments include Auto Parts Stores and Other. The Company’s Auto Parts Stores segment includes Domestic Auto Parts, Mexico, Brazil and Interamerican Motor Corporation (IMC). The Company’s Other segment includes business activities of ALLDATA, E-commerce and AutoAnything. The ALLDATA produces, sells and maintains diagnostic and repair information software used in the automotive repair industry. The e-commerce includes direct sales to customers through www.autozone.com. The AutoAnything includes direct sales to customers through www.autoanything.com. The Company operates approximately 5,069 AutoZone stores in the United States, including stores in Puerto Rico, Mexico, Brazil and IMC branches. IMC branches carry a line of original equipment import replacement parts. Source: Thomson Financial |
Sharek’s Take |
 Looking for a good stock in this crazy stock market? Look no further than AutoZone (AZO) as autos and housing continue to lead the US economy, due to low interest rates and dropping gasoline prices. AutoZone is pumping out steady double-digit profit growth, and that looks to continue throughout 2016. Last qtr AZO had just 6% sales growth but was able to put out 14% profit growth due to good same store sales (SSS) of 3.5% and stock buybacks. Management buys back lots of stock, $400 million last qtr alone. Compare that to the $22.5 billion market cap and that’s 2% of shares in a qtr, a pace of 8% per year. With 6% sales growth and around 8% less shares you can see why 14% profit growth is attainable. The company is also growing via higher Internet sales and having mega-hubs that support other locations, delivering to stores more than once-a-week. AZO is a solid buy-and-hold stock in a sector that should do well if we go into a recession. The company has 5600 stores with only 450 outside the US (mainly Mexico) so foreign exchange isn’t a real issue and low oil prices mean more miles driven thus more auto parts. At 18x earnings this stock isn’t undervalued, but has a respectable 13% estimated long-term growth rate that looks quite good right about now. |
One Year Chart |
 This stock was on a tear recently, traveling from $500 to $800 in around a year. The recent stock market correction has taken AZO down a notch, as it has most every stock out there. The best thing about this one-year chart is that Annual Profits have grown each year and along the bottom you can see the steady double-digit profit growth the company has put out the past 4 qtrs. |
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), but these seem to be maxed out now. I feel AZO is fairly valued at this time, and possesses 15% upside to 2017’s Fair Value. |
Bottom Line |
 AutoZone is a good stock for these economic times, as low oil prices are a benefit to the company and the strong dollar isn’t hurting its financial results much. This company has an estimated long-term growth rate of 13% a year and sells for a respectable 18x earnings. I feel AutoZone is a good stock to own in this volatile and uncertain stock market. AZO ranks 17th of 35 stocks in the Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 17 of 35 |
