Key Points
AutoZone's fiscal Q3 earnings beat expectations, but sales fell short of the average Wall Street analyst target.
Despite the earnings beat in fiscal Q3, AutoZone's fiscal Q3 report raised margin concerns.
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AutoZone (NYSE: AZO) stock is getting hit with a big sell-off in Tuesday's trading. The company's share price was down 9.6% as of 2:45 p.m. ET.
Before the market opened this morning, AutoZone published results for the third quarter of its current fiscal year -- a period that ended May 9. While the company posted a significant earnings beat in the quarter, sales fell short of the average analyst estimate.
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AutoZone's Q3 earnings beat wasn't enough for investors
AutoZone posted earnings per share of $38.07 on revenue of $4.84 billion in fiscal Q3. While the company's per-share profit topped the average analyst forecast by roughly $1.90, sales for the period came in $20 million below the average forecast.
Despite the overall earnings beat, there were some concerning elements when it came to the broader margins picture. AutoZone recorded a gross margin of 52.2% in the quarter -- down 57 basis points from the margin it posted in last year's quarter.
What's next for AutoZone?
AutoZone is guiding for the opening of roughly 160 new stores this quarter -- up from 121 openings in last year's quarter. The performance is projected to bring total new global store openings to roughly 365 for the fiscal year, and expansion momentum continues to look encouraging. On the other hand, the company is facing some near-term earnings pressures that extend beyond location expansion.
In its fiscal Q3 report, AutoZone said it expected last-in, first-out accounting dynamics to create a roughly $30 million headwind to earnings before interest and taxes and a roughly $1.40 headwind to earnings per share. While overall momentum for the business continues to look solid, investors are bristling in response to some margin declines and a softer near-term earnings outlook.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
