Argus Upgrades AutoZone On Strong Results On Future Growth Potential

In a report rolled out Tuesday, Argus Research Company analyst Bill Selesky upgraded shares of AutoZone, Inc.

to Buy with a $736 price target. The upgrade seeks to reflect prospects for further revenue growth, following a robust fiscal second quarter (2015), when overall revenue rose 7.7 percent and comp-store sales climbed 3.6 percent. The firm also boosted its EPS estimates for both fiscal 2015 and fiscal 2016 based on expectations for "strong industry fundamentals, including rising consumer incomes and confidence, low gasoline prices, and increases in both miles driven and average vehicle age." Argus now expects fiscal 2015 diluted EPS of $35.80 (up from a previous estimate of $35.75, and above consensus of $35.82) and fiscal 2016 dilutes EPS of $40.43 (up from $40.14, and above consensus of $40.25). This last increase is based on expectations for "a slightly higher gross margin and a lower share count next year." For the longer term, the analysts rate the stock a Buy "based on the company's strong business execution, effective use of capital, and expansion into commercial service programs, most recently through the acquisition of Interamerican Motor Corp."