AutoZone (AZO) is a retailer and distributor of automotive replacement parts and accessories. It recently delivered a robust set of fourth-quarter 2021 numbers, and also announced an additional stock buyback of $1.5 billion to its current share buyback program.
Let’s have a look at AutoZone’s Q4 performance, as well as what has changed in its key risk factors that investors should know. (See Insiders’ Hot Stocks on TipRanks)
Revenue increased 8.1% year-over-year to $4.9 billion, beating analysts’ estimates by $347.8 million. Domestic same-store sales increased 4.3% during this period.
Bill Rhodes, chairman, president, and CEO of AutoZone, remarked, “Our retail business performed very well this quarter ending with virtually flat same-store sales on top of last year’s historic growth of over 20%. And, our commercial business growth continues to be exceptionally strong at 21.2%.
“The investments we are making continue to strengthen our competitive positioning in all the sectors and markets we compete.”
While gross margin dropped 82 basis points to 52.3%, operating expenses as a percentage of sales increased to 31% from 30.7% a year ago, primarily due to higher payroll costs. Additionally, AutoZone is also making technology investments for its growth initiatives, and is witnessing increased wage costs in its stores and distribution centers.
Credit Suisse analyst Lavesh Hemnani has reiterated a Buy rating on the stock, and increased its price target to $1,785 from $1,660. After the better-than-expected Q4 showing, Hemnani sees the company continuing to benefit from “improvement in miles driven” along with AutoZone’s own initiatives.
Consensus on the Street is a Moderate Buy based on nine Buys, three Holds, and one Sell. The average AutoZone price target of $1786.82 implies a potential downside of 2.2% for the stock.
Risk Factors
According to the new TipRanks Risk Factors tool, AutoZone’s top risk category is Ability to Sell, accounting for 25%, of the total 20 risks identified. In the recent annual report, the company added one key risk factor under the Legal & Regulatory risk category.
AutoZone highlighted the potential legal and regulatory risks that may stem due to climate change. The concern over climate change may result in the enactment of legislative and regulatory actions in the U.S., which could impose mandatory requirements on greenhouse gas emissions.
Such actions may impact AutoZone’s business via increases in fuel economy requirements, restrictions on carbon dioxide emissions, or incentive programs on vehicles and automobile fuels.
The sector average Ability to Sell risk factor of 20%, AutoZone’s is at 25%. Shares are up 61.6% over the past 12 months.
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