AutoZone’s Domestic Same Store Sales Fuel 2Q Beat; Street Is Bullish

AutoZone delivered better-than-expected 2Q results, reflecting strong domestic same-store sales growth. The automotive parts and accessories retailer reported 2Q sales of $2.91 billion, which rose 15.8% year-over-year and topped the Street’s estimates of $2.76 billion. Notably, domestic same-store sales grew 15.2% in 2Q.

AutoZone’s (AZO) 2Q earnings of $14.93 a share increased 20.5% year-over-year and outpaced the Street’s estimates of $12.90. Earnings growth reflected higher revenues and operating profits. However, its gross margins declined 77 basis points to 53.6% in 2Q due to a rise in supply chain costs, pricing actions, change in product mix, and accelerated loyalty program participation.

The company’s CEO Bill Rhodes said, “While our strong (DIY) sales have been aided by government stimulus and changes to consumer behavior as a result of the pandemic, our growth initiatives continue to deliver strong share gains with both DIY and Commercial customers.” (See AutoZone Group stock analysis on TipRanks)

Following the upbeat results, Wells Fargo analyst Zachary Fadem maintained a Buy rating and a price target of $1,375 (16.5% upside potential). In a note to investors, the analyst said, “Considering strong FQ2 results, favorable industry dynamics and ongoing share gains, we are raising our FY21/22 EPS estimates to $79.50/$87.10 (vs. $75.84/$87.00 prior).” He added, “We expect $1.1B of buybacks in F2H21 to bring to total year to ~$2.7B.”

Turning now to the rest of the Wall Street community, AutoZone has a Strong Buy consensus rating based on 6 Buys and 1 Hold. The average analyst price target of $1,337.50 implies over 13% upside potential from current levels. Shares have gained 14.3% over the past 12 months.