On Tuesday, CFRA, a financial research firm, adjusted its price target for AutoZone (NYSE: NYSE:AZO) shares, a leading retailer and distributor of automotive replacement parts and accessories. The target has been increased to $3,300 from $3,250 while maintaining a Buy rating on the stock.
CFRA's decision to raise 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, which is slightly below AutoZone's five-year average forward P/E of 18.1x. This adjustment comes despite the firm lowering its fiscal year 2025 earnings per share (EPS) estimate to $159.50 from $169.25 and introducing an EPS estimate of $183.30 for fiscal year 2026.
AutoZone reported earnings per share of $51.58 for the quarter ending in August, an 11% increase from the same quarter last year but below the consensus estimate of $53.41. The earnings miss was attributed to weaker-than-expected same-store sales (SSS) and margins.
Revenue grew 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, which marked AutoZone's first miss since 2018, the company's year-over-year growth remains strong within the retail sector. CFRA highlights that the record-high average age of U.S. vehicles, now at 12.6 years, is expected to continue driving demand in the auto aftermarket industry. The research firm also notes that AutoZone's ongoing stock buyback program is anticipated to support the stock price moving forward.
In other recent news, AutoZone has been a topic of interest among several analyst firms. Evercore ISI adjusted its price target for the company and maintained its Outperform rating, while TD Cowen maintained a Buy rating. Barclays also kept an overweight rating on AutoZone, albeit with a slight adjustment to its earnings estimates. In addition to these assessments, AutoZone is under investigation by U.S. lawmakers for potential tariff evasion related to purchases from Chinese company Qingdao Sunsong.
Despite this scrutiny, the company continues to implement strategic initiatives, such as the recent appointment of Kenneth Jaycox as Senior Vice President, Commercial, Customer Satisfaction. This move is expected to bolster customer satisfaction and commercial sales performance.
These developments follow a consistent growth trend for AutoZone, with the company demonstrating low to mid-single digit comparable store sales, mid-single digit or higher revenue growth, and high single digit EBITDA growth. This robust performance is reflected in Evercore ISI's base case valuation, which applies a P/E ratio of 19.5 times the projected calendar year 2026 earnings per share.
Evercore ISI, BofA Securities, JPMorgan, and Truist Securities have made various adjustments to their price targets for AutoZone, citing different concerns but expressing continued confidence in the company's profitability and potential for future sales growth. These adjustments and developments provide a snapshot of AutoZone's recent market position and financial performance.
InvestingPro Insights
As AutoZone (NYSE: AZO) continues to be a major player in the automotive aftermarket industry, InvestingPro data and insights provide additional context to CFRA's updated price target. With a market capitalization of $49.79 billion and a P/E ratio of 20.31, AutoZone's valuation reflects its position in the market. Notably, the company has been profitable over the last twelve months, with a reported revenue of $17.98 billion, marking a growth of 5.03%.
InvestingPro Tips suggest that AutoZone's aggressive share buyback program, which has been a key factor in the company's strategy, is expected to underpin the stock's performance. Moreover, analysts predict the company will be profitable this year, supporting CFRA's positive outlook. It is worth noting that while AutoZone trades at a high P/E ratio relative to near-term earnings growth, it also operates with a moderate level of debt and has shown a strong return over the last decade.
The InvestingPro product includes additional tips on AutoZone, offering insights that may be beneficial for investors looking to make informed decisions. For more in-depth analysis and tips on AutoZone, investors can explore the full range of insights available through InvestingPro.
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