AutoZone, Inc. (NYSE: AZO) has rewarded its shareholders by announcing a $2 billion share buyback program. Approved by the board of directors, this program adds to the company’s existing share repurchase authorization.
The CFO and Executive Vice-President (Finance and Store Development) at AutoZone, Jamere Jackson, said, “We remain committed to our disciplined capital allocation policy to drive growth and enhance shareholder returns while maintaining adequate liquidity.”
Shares of the company rose 0.4% to close at $1,946.82 on Tuesday. In the extended trading session, the stock gained an additional 1.1% to close at $1,968.50.
AutoZone is a well-known retailer and distributor of replacement parts for vans, cars, light trucks, and sports utility vehicles. It also provides a wide range of accessories. The company is headquartered in Memphis, TN.
AutoZone’s Capital Allocation Policy
AutoZone has been engaging in share buyback activities since 1998. Till February 12, 2022, the company had repurchased shares worth $28.2 billion and was left with $0.96 billion authorization.
With the incremental $2-billion buyback program, the total share buyback authorization of AutoZone now stands at $31.2 billion.
In the first half of Fiscal 2022 (ended February 12, 2022), the company repurchased shares worth $2.5 billion, up from $1.6 billion shares bought back in the year-ago comparable period. The company’s share count declined 8.9% year-over-year to 21.38 million shares at the end of the first half of Fiscal 2022.
A decrease in share count due to buybacks boosted AutoZone’s earnings per share by $1.64 per share in the first half of Fiscal 2022.
It is worth mentioning that AutoZone’s ability to repurchase shares depends on its financial performance and cash position. The company’s earnings in the first half increased 43% year-over-year to $48.03 per share.
Exiting the second quarter of Fiscal 2022, the company’s cash and cash equivalents were $239.4 million, and its cash flow from operating activities totaled $1.1 billion in the first half.
Analysts’ Take
Earlier this month, Christopher Horvers, an analyst at J.P. Morgan, reiterated a Buy rating on AutoZone with a price target of $2,200 (13% upside potential).
Another analyst, Greg Melich of Evercore ISI, maintained a Hold rating on AutoZone with a price target of $1,980 (1.7% upside potential).
Overall, the Street is cautiously optimistic on AutoZone and has a Moderate Buy consensus rating based on seven Buys and four Holds. The average AZO price target of $2,166.36 mirrors 11.28% upside potential from current levels. Over the past year, shares of AutoZone have increased 47.1%.
Bloggers Opinion
Per TipRanks data, the financial blogger opinions are 100% Bullish on AZO, compared with the sector average of 67%.
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