Autozone, Inc. - Momentum

Autozone, Inc. (AZO) continues to trade near its all-time high after reporting strong Q1 results in early December that included a 10% earnings surprise. With a discounted valuation and bullish growth projection, this Zacks #1 rank stock offers a nice tune up for the momentum investors of the world.

Although shares traded a bit erratically on the news, AutoZone reported strong Q3 results on Dec 7 that beat analyst expectations and showcased the company's strong rebound from the recession of 2009.

First-Quarter Results

Revenue for the period was up 13% from last year to $1.8 billion. Earnings also came in strong at $3.77, 10% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 6% over the last four quarters in a fairly challenging consumer environment.

Although AutoZone's impressive same-store sales growth of 9.5% drove the good results, the company also saw its costs go down, with gross margin expanding 40Bps to 50.7% of sales. Operating expenses also declined, falling to 33.6% of revenue from 33.9% last year.

Share Buy Backs

AutoZone was also busy returning value to shareholders during the quarter, repurchasing 1.3 million shares of its common stock for $300 million, with $386 million left on the repurchase authorization.

Estimates

We did see a little bit of movement in estimates off the good quarter, with the current year gaining 57 cents to $17.98 and the next-year estimate adding 72 cents to $20.25, a solid 13% growth projection.

Valuation

But in spite of the solid gains, AZO still has value, trading with a forward PE of 15X, a nice discount to the industry average of 17X.

6-Month Chart

On the chart, shares were volatile on the good quarter before resuming the upward trend that has been in play for the last 18 months. Look stochastic below the chart is signaling that shares are trading safely away from over-bought territory. Look for support from the trend line on any weakness, take a look below.

Read the Sep 29 AZO article here

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Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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