AutoZone topped earnings estimates for the fourth quarter Monday, as the aftermarket auto parts retailer closed out its fiscal year with profit and sales growth, bucking the recent industry trend. AutoZone stock angled higher before dropping Monday as the retailer cited higher freight costs.
The Memphis, Tennessee-based company is a leading aftermarket auto parts business in the U.S. There are more than 6,000 AutoZone stores in the country, with more than 700 in Mexico and another 72 in Brazil.
The availability of new and used vehicles throughout the Covid pandemic has been an issue for consumers. In response, many car owners have opted for do-it-yourself repairs rather than paying a premium for another car. But inflation and other factors has resulted in many consumers putting off bringing vehicles into a shop.
For most of the last two years, this reality has cut into revenue and earnings growth for aftermarket and maintenance outfits including Advance Auto Parts, O'Reilly Automotive and AutoZone.
However, AutoZone has held up well with the company beating estimates by healthy margins in each of the last four quarters.
AutoZone Earnings
Estimates: Wall Street predicted AutoZone earning $38.51 per share in Q4. Revenue was expected to be $5.2 billion and same-store sales were expected to be up 3.4%.
Results: AutoZone earnings grew 13% to $40.51 per share. Sales rose 9% to $5.3 billion in Q4. Both marked a slight acceleration from the prior quarter. Same-store sales were up 6.2%.
Fiscal 2022: AutoZone earnings grew 23% to $117.19 per share, with sales up 11% to 16.3 billion. Domestic same-store sales were up 8.4% for the full year.
"Our retail business performed well this quarter ending with positive same-store sales on top of last year's strong performance," CEO Bill Rhodes said in a statement.
Rhodes told investors Monday during an earnings call that Q4 revenue gains came from inflation. This was was in line with cost of goods, which was up about 10%, according to Rhodes.
AZO expects inflation and cost of goods to be similar in the first quarter of 2023.
"As rising raw material pricing, labor and transportation costs are all impacting us and our suppliers, inflation has been prevalent in the aftermarket space," Rhodes said.
"While we continue to be encouraged with the current sales environment, it remains difficult for us to forecast near to midterm sales," he added.
AutoZone sees higher inventory-related costs in the first half of fiscal 2023, mostly related to freight costs.
Wall Street forecasts full year earnings of $125.79 per share in fiscal year 2023 on $16.8 billion in revenue, according to FactSet.
AutoZone Stock
AutoZone increased 2.4% early, briefly reclaiming its 50-day line, before reversing as low as 2,065.29. Shares pared losses to down 3.1% at 2,097.59 in Monday's stock market trading.
AZO stock climbed 1% on Friday to 2,165.65, technically in range of a 2,130.60 buy point first cleared in June.
AutoZone stock has an 91 Composite Rating out of 99. It has a 92 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The rating shows how a stock's performance over the last 52 weeks holds up against all the other stocks in IBD's database. The EPS rating is 94.
ORLY stock increased 0.3% Monday. Shares are not far from highs but are below their 50-day line.
AAP stock rose 0.8% Monday. Shares are trading near 52-week lows.
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