How the Pandemic Boosted AutoZone Earnings

AutoZone Inc. (NYSE: AZO) reported fourth-quarter and fiscal 2020 results before markets opened Tuesday. The auto parts retailer posted quarterly diluted earnings per share (EPS) of $30.93 on net revenue of $4.5 billion. In the same period a year ago, AutoZone reported EPS of $22.59 on revenue of $4.0 billion. Fourth-quarter results also compare to consensus estimates for $24.79 in EPS and $4.15 billion in revenue.

For the fiscal year, the company said it had revenue of $12.6 billion and diluted EPS totaled $71.93. In the prior year, AutoZone reported revenue of $11.9 billion and EPS of $63.43. Consensus estimates had called for EPS of $65.45 and sales of $12.24 billion.

Domestic same-store sales for the quarter increased by 21.8% and rose by 7.4% for the full year.

AutoZone did not offer guidance, but consensus estimates call for first-quarter EPS of $15.47 on revenue of $2.93 billion. For the 2021 fiscal year, analysts are looking for EPS of $70.77 and revenue of $12.7 billion.

The company did not repurchase any stock during the quarter. For the year, buybacks totaled $930.9 million, and the company has $796 million remaining in its share repurchase program.

In August, AutoZone announced that it planned to hire 20,000 new employees for the company’s U.S. stores. Auto parts stores were designated as essential businesses during the COVID-19 lockdowns, and the company noted that expanded federal unemployment benefits had a “meaningfully positive” impact on sales.

AutoZone opened 49 new U.S. stores during the fourth quarter, along with 11 in Mexico and five in Brazil. At quarter’s end, the company had 5,885 U.S. stores, 621 stores in Mexico and 43 in Brazil, for a total store count of 6,549.

Even without the pandemic, new vehicle sales were projected to decline this year. The coronavirus outbreak only made it worse. During the financial crisis of a decade ago, new car sales plunged as Americans chose to repair, rather than replace, their existing vehicles. This time around, more owners did the work themselves rather than taking their vehicles into professional shops for service and minor repairs.

CEO Bill Rhodes noted that same-store sales improved year over year by 21% to 27% per week during the quarter. However, following the expiration of expanded federal payments at the end of July, same-store sales rose by 16.5% a week.

AutoZone stock was up about 2% early Tuesday to $1,209.96. The stock’s 52-week range is $1,164.80 to $1,274.41. The consensus 12-month price target on the shares is $1,342.38. AutoZone does not pay a cash dividend.

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