Evercore ISI Reiterates Outperform Rating on AutoZone (AZO)
Evercore ISI analyst Greg Melich reiterated an Outperform rating and $3,390.00 price target on AutoZone (NYSE: AZO).
The analyst comments "AZO reports F1Q results on 12/10 before market open. AutoZone has been solid this year with its defensive growth attributes in demand (even if topline has been somewhat volatile), with AZO up 29% vs. the XRT up 16%/ +28% S&P. We are looking for comp store sales to hover in the 0.5-1% range domestically (consistent to slightly ahead of last quarter), with EPS of $34 vs. the Street at $33.65. AZO appears well positioned to gain share into what remains a sluggish auto aftermarket backdrop into 2025, in our view, with a focus on widening the moat via enhanced inventory availability and in store execution. The five-year comp of 37% lags ORLY’s near 50% growth, but it does exceed public peers GPC (NAPA) at +10% and AAP at +13%. We look for DIFM acceleration into ‘25 as weather should normalize, and AZO continues to roll out mega hubs/faster delivery by deploying inventory closer to the consumer. We see Advance, weak independents, and to a lesser extent Genuine Parts (NAPA) as most likely share donors. Disinflation is showing signs of normalization into ’25, with two+ years of pent up demand from declining industry transaction volume a little bit of normal winter weather could go a long way for demand. We recently attended the AAPEX auto aftermarket conference in Las Vegas where we spoke with numerous suppliers, competitors and AZO’s CFO Jamere Jackson confirming that AutoZone is seeing solid traction on growth initiatives domestically and abroad. The formula of solid fundamentals and capital stewardship have been hallmarks of AZO stock historically, and should continue to propel outperformance, in our view. Our $3,390 base case applies a C26 P/E of ~18.5x C26 EPS with defensive growth and pricing power attractive amidst a sluggish lower income consumer backdrop with potential tariff uncertainty more of a risk for others (and potentially an opportunity for AZO & peers), and diminished EV risk concerns and lower fuel prices additional positives thus far amidst a Washington regime change. ORLY at 25x remains our Fab Five Portfolio top pick in the auto aftermarket for more consistent share gain, yet we believe the potential normalization of comp/share trends into ’25 can drive outperformance for AZO as well."
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Shares of AutoZone closed at $3309.44 yesterday.