On May 29, we maintained our Neutral recommendation on
), based on its improved third quarter fiscal 2013 performance
combined with the company's focus on share repurchase program and
store expansion. However, we are concerned about the rising gas
prices and AutoZone's heavy reliance on its private-label brands.
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Why the Reiteration?
On May 21, AutoZone reported a 15.8% rise in earnings per share
to $7.27 for the third quarter of fiscal 2013 (ended May 4, 2013)
from $6.28 in the year-ago quarter. Earnings surpassed the Zacks
Consensus Estimate by 6 cents. Quarterly revenues increased 4.4%
to $2.2 billion. Domestic same-store sales (sales for stores open
at least one year) decreased 0.1% in the quarter.
Following the release of the third quarter results, the Zacks
Consensus Estimate for fiscal 2013 increased marginally by 0.4%
to $27.63 per share. The Zacks Consensus Estimate for fiscal 2014
went up 0.8% to $31.23 per share. Currently, AutoZone retains a
Zacks Rank #3 (Hold).
AutoZone actively focuses on its store-opening strategy. In the
first nine months of fiscal 2013, the company has opened 84
stores in the U.S. and 20 stores in Mexico. As of May 4, 2013,
the company had 4,767 stores in 49 states, the District of
Columbia and Puerto Rico in the U.S., 341 stores in Mexico and
one store in Brazil.
Advance Auto Parts Inc.
), another leading retailer and distributor of automotive
replacement parts and accessories, also pursues an aggressive
store expansion strategy. During the first quarter of fiscal year
ended Apr 20, 2013, it acquired 124 BWP stores and opened 56
stores, including 7 Autopart International stores, and closed 5
), one of the largest used vehicles retailers, opened two stores,
penetrating the Denver, Colorado, and Jacksonville, Florida,
markets in the fourth quarter of fiscal 2013. In fiscal 2013, the
company has opened ten stores, bringing its used car superstore
count to 118 as of Feb 28, 2013. The company intends to open
between 10 and 15 superstores in each of the following two fiscal
Increasing vehicles on roads and the subsequent growth in demand
for auto parts is benefiting AutoZone. Revenues from Mexico
benefited from the abundance of old cars and a shortage of
quality parts. In this situation, AutoZone plans to gain market
share by category-management efforts and supply-chain initiatives
in the retail segment.
However, we are concerned about rising gas prices, which has an
adverse impact on miles driven and lead to deferment of
maintenance by the customers. In addition, AutoZone has a high
degree of reliance on its private-label brands, which could
hinder its commercial business.
Other Stocks to Look For
O'Reilly Automotive Inc.
), with Zacks Rank #2 (Buy), is performing well in the auto parts