Deutsche Bank Cautious Ahead Of AutoZone's Q1 Earnings, Cites Tough Comparisons

AutoZone, Inc. AZO is scheduled to report its first-quarter results on December 9 before market open.

In a note to clients on Monday, Deutsche Bank analyst Mike Baker is expecting AutoZone to report comps of 2.7 percent, ahead of consensus expectations of 2.4 percent. However, the analyst cautious investors that “tougher comparisons are on the horizon.”

“The comparisons in the second and third quarter are particularly difficult as the industry benefited from a return to favorable winter conditions in December 2013 – February 2014 following two years of relatively warm weather,” Baker wrote. The analyst adds that the weather backdrop last year resulted in better-than-expected comps for the industry.

Baker also notes that share buybacks may have peaked following $1.1 billion in purchases made in fiscal 2014. The analyst explains that AutoZone's EBIT growth is likely moderate on a view that the number of cars in the seven to 11-year-old “sweet spot” has peaked. This provides less for the company to borrow against to continue funding share buybacks.

Baker is projecting AutoZone to earn $7.20 in the first quarter on revenue of $2.2503 billion. The analyst expects the company's gross margin to be unchanged from a year ago at 51.9 percent.

Shares are Hold rated with a $500 price target.