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