What To Do With AutoZone Stock After A Strong Q1

Shares of AutoZone, Inc. AZO gained more than 2 percent after the auto parts retailer reported better-than-expected earnings for its first quarter.

Quarter, In Review

Autozone reported first-quarter earnings of $9.36 per share on revenue of $2.46 billion. Analysts were expecting earnings of $9.31 per share on revenue of $2.49 billion. Comps of 1.6 percent were slightly below consensus’ 1.8 percent.

Despite a revenue miss and soft comps, the Street is cheering the results due to the company's consistent earnings growth and upcoming growth opportunities.

Analysts' Commentary

Seth Basham of Wedbush maintains his Outperform rating on the shares on strong execution and improved growth in commercial sales. The analyst, who has a price target of $870, highlighted that Autozone is very well positioned among hardlines retailers in the event of slower macro growth given countercyclical qualities.

“AZO should not only benefit from relative strength in the industry’s DIY segment, but also from the rollout of its new distribution strategy and a move toward more direct sourcing. These drivers point to upside in gross profit dollars, a key driver for AZO, and continued low-mid teens EPS growth,” Basham wrote in a note.

In the same vein, Alan Rifkin of BTIG said he remains Buy rated on Autozone given the company’s strong ROIC, which increased 10 bps to 31.3 percent for the quarter. 

Rifkin is also bullish on the Autozone’s commercial growth opportunity, relatively low exposure to online competition, positive industry fundamentals and disciplined capital return policy.

At last check, shares of Autozone rose 1.16 percent to $785.39. Rifkin has a price target of $900.