has had a great run over the past 12 months, demolishing the broader stock market tenfold. Analysts see more good news ahead as the weak recovery forces car owners to hold on to older vehicles longer and commercial customers beef up maintenance businesses for their customers.
AutoZone is a leading retailer and a leading distributor of automotive replacement parts and accessories. At the end of fiscal 2011, it operated 4,534 stores in the United States, including Puerto Rico, and 279 in Mexico.
In 2,659 of the domestic stores, AZO also had a commercial sales program that provided commercial credit and delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts.
“We believe that expansion opportunities exist both in markets that we do not currently serve, as well as in markets where we can achieve a larger presence. We attempt to obtain high visibility sites in high traffic locations and undertake substantial research prior to entering new markets,” management said in a recent filing.
“The most important criteria for opening a new store are the projected future profitability and the ability to achieve our required investment hurdle rate,” management explained, including a study of vehicles used in the area, known as the "vehicle profile."
“In reviewing the vehicle profile, we also consider the number of vehicles that are seven years old and older, or ‘our kind of vehicles’; these vehicles are generally no longer under the original manufacturers’ warranties and require more maintenance and repair than younger vehicles.”
AutoZone has a market cap of $14.33 billion in a sector, specialty retail, where the average company size is $5.82 billion. Its trailing 12-month P/E ratio is 17.17 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.06, compared to 1.28 for the sector.
Its projected earnings per share growth for the coming year is 15.85 percent, compared to a sector average of 15.70 percent.
Analysts are bullish on AZO, with buy or outperform calls from Raymond James, Citigroup Investment Research, Morgan, Keegan & Company, JP Morgan, and Oppenheimer & Company.
Goldman Sachs rates the company a sell.
“AutoZone is focused on an aggressive share repurchase program along with expansion of hub stores. But we are concerned about the rising gas prices and stiff competition that may impact the company’s margins,” said Zacks Investment Research analysts in a report dated May 23.
“As such, we continue with our neutral recommendation on the stock and set a target price of $379.”
AutoZone next reports on Sept. 18.
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