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Autozone Climbs as Earnings Approach

May 12 2010

Autozone (AZO) Climbs as Earnings Approach

Despite a slight sell off down to the $175 a share range along with the market swoon Monday this week, the stock of Autozone (AZO)continues to perform and is close once again to a new 52 week high. The stock has moved back to $185 over the past three days within reach of the current year period high of $187.94. With earnings season approaching, the stock should behave well over the near term.

The earnings expectations have been somewhat flat over the past 90 days with only one recent analyst upgrade. When the company announces on May 25th, analysts will be looking for 3.57 a share. This represents 14% growth when compared to the same quarter last year. Next quarter’s growth is also expected to be around 14%. With a price to earnings (P/E) ratio of 13.28, the stock is a little bit above fair value. But paying a premium for the growth isn’t unheard of. Revenues are also rising between 3 to 4%.

The fundamental story for Autozone remains the increase in oil prices and the credit crunch creating a strong market for the auto parts retailer. With drivers looking to save money on travel they are performing more maintenance themselves and replacing inexpensive items like air filters more often. In addition, the credit crunch has made it more difficult to purchase new automobiles increasing the number of parts required to keep the current automobile inventory operational.

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