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AutoZone Is Citi's Top Auto Part Retail Pick

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In a report published Monday, Citi analyst Kate McShane maintained a Top Pick rating on AutoZone, Inc. (NYSE: AZO), saying that the company was their “best non-consensus call” and their “most favored idea in the auto part retail space.”

AutoZone’s shares have risen over the past 9 months, and the stock is currently trading at a 14 percent premium to its 3-year average.

“We think we are at a point in the story where we will start to see accelerated top- and bottom-line growth based on strong industry fundamentals, successful investment in the commercial segment, continued strength in DIY and a strong management of costs,” analyst Kate McShane said.

In the report Citi noted that favorable industry factors as:

  • The average age of cars has reached 11.5 years, which is an all-time high. Cars that are older than 11 constitute 47 percent of vehicles in operation
  • Scrappage rates continued to decline
  • The auto repair shop count and sales per auto repair shop continue to rise

The Auto Care Association raised its auto part aftermarket sales projection for 2015-2017 by 1.3 percent for DIFM and 2.3 percent for DIY. “The raise in forecasts is encouraging considering that the industry also grew 100 bps ahead of expectations at +3.8% y/y in 2014,” McShane wrote.

McShane expects the company’s DIFM programs that are 4 years and younger to continue to boost DIFM sales, “as the newer programs comp aggressively during the ramp-up period followed by still solid MSD growth.”

“We expect AZO to manage through the increasing sales mix towards commercial sales through leveraging expenses off of higher sales,” the report added.

Latest Ratings for AZO

Feb 2018ArgusMaintainsBuy
Dec 2017GuggenheimDowngradesBuyNeutral
Dec 2017Moffett NathansonInitiates Coverage OnNeutral

View More Analyst Ratings for AZO
View the Latest Analyst Ratings

Posted-In: CitiAnalyst Color Reiteration Analyst Ratings


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