AutoZone Set To Gain As Tariffs Push Car Owners To Repair Over New Purchases: Analyst

Core Viewpoint - BofA Securities analyst Robert F. Ohmes upgraded AutoZone, Inc. from Neutral to Buy, raising the price forecast from $3900 to $4800 due to increased confidence in the company's performance during economic downturns and market share gains [1] Group 1: Market Dynamics - Improving dynamics in the used versus new car market and ongoing momentum in the Pro business supported by maturing commercial programs are noted [2] - Consumers are expected to repair existing vehicles rather than purchase new ones due to rising vehicle costs, leading to increased demand for auto parts [6][7] Group 2: Financial Projections - The upgrade reflects a shift to a 27x FY2026E EPS multiple from the previous 22x, with projected EPS of $38.15 and domestic comparable sales growth of 2.0% [3] - A 19 basis point decline in gross margin is anticipated for Q3 due to a $24 million LIFO benefit recorded in the same quarter last year [4] Group 3: Inflation and Pricing Strategy - AutoZone is well-positioned to navigate tariff pressures, with only about one-third of its product offerings sourced from China, reducing exposure to increased import duties [5] - The company is expected to successfully pass on incremental price increases to consumers, with potential industry inflation of 2%–4% driven by auto parts retailers [5][6] Group 4: Future Outlook - Several tailwinds are anticipated for AutoZone, including ongoing market share gains, inflation-driven price increases, and continued support from its Pro segment [8]