This auto parts retailer beat estimates by six cents in the last quarter, and analysts have increased their earnings forecast twice in the past month. Today’s second recommendation is to sell a dollar store retailer, based on slim earnings forecasts.
AutoZone Inc. (AZO)
from Blue Chip Growth
AutoZone Inc. (AZO) is the No. 1 auto parts chain in the U.S. With more than 5,000 stores in the U.S. and Puerto Rico there are few places in the country where you can’t find an AutoZone nearby. The company also operates 441 locations and counting in Mexico and is working to expand its business in international markets.
My mechanic tells me that of all the national chains, AutoZone has the best operation that supports car shops. Usually, that commercial business was more fractured and regional, but AutoZone is trying to take the commercial business to the national level.
And the company is thriving. AutoZone’s fourth-quarter sales were up more than 7.9% from a year ago, which drove earnings 13% higher. As the company continues to capture market share, now is the right time to pounce on this opportunity. I’m particularly excited about what’s to come this quarter. Since the last earnings announcement, the analyst community has revised their consensus earnings estimate 14% higher and if business continues on its current path, we’ll see AZO break through these increased estimates.
All the while, AutoZone knows how to reward its shareholders. Just last week, AutoZone added $750 million to its ongoing stock buyback program. Since it began buying back its stock in 1998, AutoZone has repurchased $16.4 billion (or 40%) of its shares. AZO will be added to our Buy List as a Moderately Aggressive stock and should be bought under $802.
Louis Navellier, Blue Chip Growth, www.bluechipgrowth.com, 800-718-8289, November 2015