Core Viewpoint - AutoZone reported a solid quarter with mixed results relative to consensus, leading to a pullback in share prices, but the overall uptrend remains intact and may signal a buying opportunity soon [2][3]. Financial Performance - AutoZone's Q3 net revenue reached $4.24 billion, reflecting a 3.7% year-over-year increase, although it missed consensus by 160 basis points [3]. - Comparable store sales in the U.S. were flat, while international business grew at an 18% comparable rate due to new store openings [3]. - The company improved its gross margin by 102 basis points, primarily due to enhanced merchandise margins, resulting in a 4.9% increase in operating profits and a 7.5% increase in GAAP earnings, aided by share repurchases [3]. Share Buybacks and Cash Flow - AutoZone repurchased $735 million worth of shares in Q3, with repurchases in fiscal 2024 supported by the company's free cash flow [3]. - The balance sheet shows a flat cash position, low leverage, and an increasing deficit due to significant share buybacks, which is not viewed as a red flag but rather a strategy to enhance shareholder value [3]. Analyst Sentiment - Analysts maintain a "Moderate Buy" rating for AutoZone, with a price target suggesting an 11% upside from current levels, indicating potential for new all-time highs later in the year [4]. - Institutional support for the stock is solid, with critical support levels identified around $2,700, which, if breached, could lead to further declines before a rebound occurs [4]. Market Context - Despite the current market pullback, the overall outlook for AutoZone remains positive, with expectations of steady growth and solid cash flow continuing into the summer season [3][4].
AutoZone Pulling Back Into the Buy Zone