Can Earnings Get AutoZone Back on Track?

Chris Lange

AutoZone Inc. (NYSE: AZO) shares have taken a beating in 2017 so far at the hands of weak earnings, industry sales trends and the specter of Inc. (NASDAQ: AMZN). In fact the stock is down about 28% year to date, but this is consistent with the industry. The question remains of whether AutoZone can turn itself around with its most recent earnings report expected Tuesday morning, or the company will keep driving lower.

Thomson Reuters has consensus estimates of $15.13 in earnings per share (EPS) and $3.49 billion in revenue. The fiscal fourth-quarter of last year had reportedly had EPS of $14.30 and $3.4 billion in revenue.

This past summer has been especially hard on AutoZone. About a year ago, Jefferies issued a report saying that Amazon was offering same-day delivery for auto parts in 40 major U.S. cities. Not only this, but the firm also noted that the prices were on average 23% less than these major chains. This would have major implications for the industry as a whole.

O’Reilly Automotive Inc. (NASDAQ: ORLY) issued a warning over the summer that its sales would miss on its coming report. This is the result of what CEO Greg Henslee would call a “challenging demand environment.” After seeing this investors sold off the auto parts retailer industry and didn’t look back.

AutoZone saw its single largest drop in 2017 after the firm reported its fiscal third-quarter results in May. At that time, the company whiffed on both the top and the bottom lines, as the result of a “very challenging spring sales season.”

It seems that ever since Amazon got a foothold in this industry, these retailers haven’t been able to compete. Although this may be the case, AutoZone and other companies in this space can only fall so far before they might become a value play. In the meantime this earnings report will help to properly value the stock.

Ahead of the earnings report, analysts had this to say about AutoZone:

  • Merrill Lynch has a Buy rating with a $625 price target.
  • Deutsche Bank has a Hold rating with a $550 price target.
  • Oppenheimer has an Outperform rating.
  • Wolfe Research has an Underperform rating.
  • Credit Suisse has an Outperform rating with a $583 price target.
  • Barclays has an Overweight rating with a $710 price target.
  • Morgan Stanley has an Equal Weight rating.
  • Wedbush has a Neutral rating.

Shares of AutoZone were last seen trading at $568.00, with a consensus analyst price target of $660.95 and a 52-week range of $491.13 to $813.70.