Expectations Higher for AutoZone

By Andy Meek

Analysts are forecasting a nearly 18 percent jump in earnings per share when AutoZone Inc., the leading auto parts retailer in the nation, reports quarterly earnings next week.

(Photo: Brandon Dill)

The consensus estimate among Wall Street analysts covering the Memphis-based company’s stock is for AutoZone to post earnings of $4.44 per share on Dec. 6. During the same period last year, AutoZone posted earnings of $3.77 per share.

AutoZone’s stock closed Wednesday, Nov. 30, a little above $328, up about 24 percent over the past 12 months. The company sells auto and light truck parks, chemicals and accessories across more than 4,500 stores in 48 states plus the District of Columbia and Puerto Rico, in addition to 279 stores in Mexico.

When the company reported fiscal fourth quarter results in September, it posted earnings per share of $7.18 that represented the 20th consecutive quarter of double-digit earnings per share growth for the company. The company also recently hit some all-time records like topping $8 billion in sales and $1 billion in commercial sales.

Investors like the company because of milestones like that but also because of the realities of the car market. There are roughly 240 million cars on the road in the U.S. right now. Moreover, those cars are getting older – pushing past the decade mark – and cash-strapped owners are increasingly delaying both pricey and smaller, less necessary repairs longer.

For major repairs that are unavoidable, though, AutoZone has put itself in the fast lane of its industry, according to Morningstar Inc. analyst Liang Feng.

“According to data from the Automotive Aftermarket Industry Association, or AAIA, and our own internal estimates, AutoZone commanded approximately 15 percent of the (do-it-yourself) retail market during fiscal year 2010, approximately 50 percent more than its closest peers,” Feng wrote in his most recent analyst note on the company.

During the last earnings call with analysts, AutoZone chairman, president and CEO Bill Rhodes said the company is noticing a slowdown in the pace of general maintenance repairs among its customers. But he said the company is taking steps to absorb any slowdown, such as opening new stores and building up its commercial business.

“We believe AutoZone’s distribution advantage, combined with the healthy economics of the auto parts retail market, creates a narrow economic moat that should allow the company to generate excess economic returns over the foreseeable future,” Feng wrote.