The credit rating of
) senior unsecured debt has been raised one notch to "Baa1" from
"Baa2" by Moody's Investors Service of
). Additionally, the rating agency affirmed the ratings on the
Prime-2 commercial paper. The outlook for both the ratings is
Moody's started the review of AutoZone's ratings for upgrade
on Dec 16, 2013. The upgrade of the rating is a result of that
review. The "Baa1" rating is three grades above speculative-grade
or junk status.
The credit ratings are based on the strong business prospects
of AutoZone due to rising age of vehicles and increase in miles
driven. The company has the best margins among its peer group and
management maintains the debt-to-EBITDA ratio at the targeted
level. Moreover, Moody's expects AutoZone to supervise store
spending to keep the stores at par with its peers.
The stable outlook was based on Moody's' belief that AutoZone
will be able to maintain its strong credit profile and manage its
share buybacks to maintain the current level of liquidity.
Moody's might upgrade AutoZone's ratings if the company
maintains its EBITA/interest ratio at 8 times and debt/EBITDA
ratio at 2.25 times while ensuring strong liquidity. On the other
hand, if EBITA/Interest ratio sinks below 6 times, debt/EBITDA
ratio falls below 3 times or liquidity position of AutoZone
weakens, then a rating downgrade is possible.
AutoZone currently carries a Zacks Rank #3 (Hold). Some
better-ranked auto parts companies include
U.S. Auto Parts Network, Inc.
Advance Auto Parts Inc.
). While PRTS carries a Zacks Rank #1 (Strong Buy), AAP holds a
Zacks Rank #2 (Buy).
ADVANCE AUTO PT (AAP): Free Stock Analysis
AUTOZONE INC (AZO): Free Stock Analysis
MOODYS CORP (MCO): Free Stock Analysis Report
US AUTO PARTS (PRTS): Free Stock Analysis
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