AutoZone Inc. (AZO) recently announced its financial results for the first quarter. It beat both earnings and revenue expectations for the period despite the difficult operating environment due to the pandemic.
The Memphis, Tennessee-based car parts maker announced earnings of $442.4 million, or $18.61 per share for the three months period ended Nov. 21, as compared to $350.3 million, or $14.30 per share in the same period last year. On the other hand, analysts surveyed by FactSet were expecting AutoZone
Revenue for the quarter rose to $3.154 billion, as compared to $2.793 billion in the year-ago quarter. Analysts on average were looking for revenue of $3.147 billion.
Speaking on the results, CEO Bill Rhodes said in a statement, “as the COVID-19 global pandemic continues, our primary focus has been and continues to be the health, wellness, and safety of our customers and AutoZoners.”
The company repurchased $678.3 million worth of its common stock during the first quarter at an average price of $1,161 a share. Looking forward, it plans to spend $117.6 million as a part of its overall share repurchase program.
AutoZone’s inventory in the quarter increased 3.7 percent on a year over year basis, mainly due to more store openings. It opened 39 new stores in the United States, besides a couple of store openings in Brazil during the quarter.
However, it also faces competition from smaller auto-part rivals, as well as big companies such as Amazon and Walmart. But it is famous for providing specialized customer services that give it an edge over rivals. Moreover, it also offers a wide range of free services such as battery testing, tool loaning, check engine light readings, and battery charging, among others.
Another factor that has been contributing to its growth is the increasing age of vehicles that has a positive impact on the overall demand for auto parts. The average age of light vehicles in the U.S. has increased from nearly 8.5 years in 1996 to about 12 years in 2020. The company is expected to benefit from the rising age of vehicles, as it deals in the aftermarket automotive parts and accessories.
Increasing Electric Vehicles
Some industry experts believe that the increasing adoption of electric vehicles (EV) around the world may affect the auto parts retail market in the coming years. It is true that EVs have relatively lower maintenance costs and have fewer parts. However, AutoZone
Moreover, the worldwide automotive market will still be dominated by conventional vehicles for many years to come. Therefore, AutoZone
The consensus price target for Autozone
AutoZone stock traded relatively flat this year in terms of price change. If we look at the performance of the stock in recent months, it has declined nearly 5 percent on a year-to-date basis. The 52-week range of the stock is $684.91-$1,268.99, while its market cap stands at $26.343 billion.