ARGUS Maintains 'Hold' on AutoZone (AZO), Saying Buyback No Replacement For Organic Growth

September 26, 2008 10:38 AM EDT

ARGUS maintains a 'Hold' on AutoZone (NYSE: AZO).

ARGUS analyst says, "...We explored a move by majority shareholder Edward Lampert and his ESL Group to induce AZO management to borrow around $500 million for more share buybacks (representing 6%-7% of the outstanding stock). We noted that a similar Lampert-directed move at Sears had met with mixed results on a share-price basis. We think the results of a debt-financed buyback (formally approved on September 24) will be good for earnings in the near term. However, we are skeptical about the long-term benefits, as such a move will not drive organic growth and cannot continue indefinitely...AZO shares have climbed above the entry point we mentioned in our last note and are now trading in the high $120s. We believe that the shares are fully valued at this level and that a HOLD rating remains appropriate."

AutoZone, Inc. is a specialty retailer and distributor of automotive replacement parts and accessories, with most of its sales to do-it-yourself (DIY) customers.

Related Categories

Analyst Comments

Stocks Mentioned

Related Entities

• Edward Lampert
• RBS Partners
• ESL Investments
• Argus

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?