AutoZone (NYSE: AZO) Price Target Raised to $3,300 by CFRA - What's Next?
On Tuesday, CFRA, a leading financial research firm, made a significant adjustment to its price target for AutoZone (NYSE: AZO) shares, a prominent retailer and distributor of automotive replacement parts and accessories. The firm raised the target to $3,300 from $3,250 while maintaining a Buy rating on the stock.
CFRA's decision to increase the price target is based on a forward price-to-earnings (P/E) ratio of 18.0x for the fiscal year ending in August 2026, slightly below AutoZone's five-year average forward P/E of 18.1x. Despite lowering its fiscal year 2025 earnings per share (EPS) estimate to $159.50 from $169.25, CFRA introduced an EPS estimate of $183.30 for fiscal year 2026.
AutoZone reported earnings per share of $51.58 for the quarter ending in August, showing an 11% increase from the same quarter last year but falling below the consensus estimate of $53.41. The earnings miss was attributed to weaker-than-expected same-store sales (SSS) and margins.
Revenue grew by 9% to $6.21 billion, slightly missing the consensus by $10 million, with a modest 0.7% increase in SSS, which was 50 basis points below the consensus. Gross margin also contracted by 20 basis points to 52.5%, falling short of consensus expectations by 50 basis points.
Despite the earnings shortfall, AutoZone's year-over-year growth remains strong within the retail sector. CFRA points out that the record-high average age of U.S. vehicles, currently at 12.6 years, is expected to drive demand in the auto aftermarket industry. Additionally, the firm anticipates that AutoZone's ongoing stock buyback program will support the stock price moving forward.
In recent news, several analyst firms have shown interest in AutoZone. Evercore ISI adjusted its price target for the company, maintaining its Outperform rating, while TD Cowen maintained a Buy rating. Barclays also retained an overweight rating on AutoZone, with slight adjustments to its earnings estimates. However, the company is under investigation by U.S. lawmakers for potential tariff evasion related to purchases from Chinese company Qingdao Sunsong.
Despite the scrutiny, AutoZone continues to implement strategic initiatives, such as the recent appointment of Kenneth Jaycox as Senior Vice President, Commercial, Customer Satisfaction, aimed at improving customer satisfaction and commercial sales performance.
In conclusion, AutoZone's consistent growth trend, low to mid-single digit comparable store sales, mid-single digit or higher revenue growth, and high single digit EBITDA growth reflect its strong performance in the retail sector. Analysts remain confident in the company's profitability and potential for future sales growth, as evidenced by various adjustments to price targets. These developments provide a snapshot of AutoZone's current market position and financial performance.
Analysis:
AutoZone's recent price target adjustment by CFRA reflects the firm's positive outlook on the company's future performance. Despite some challenges, such as an earnings miss and ongoing investigations, AutoZone's strategic initiatives and strong growth trends position it well in the automotive aftermarket industry. Investors may consider the company's aggressive share buyback program and positive analyst ratings when making investment decisions. Overall, AutoZone's market position and financial performance suggest a promising outlook for potential investors.