AutoZone, Inc. (NYSE:AZO) is one of those specialty retailers that tend to do well regardless of the economic cycle. After all, most of us own an automobile and AutoZone retails and distributes automotive replacement parts and accessories. Founded in 1979 and based in Memphis, Tennessee, AutoZone operates almost 5,500 stores in the U.S. and Puerto Rico, 411 stores in Mexico and 5 in Brazil.

Each store carries an extensive product line for cars, SUVs, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts to repair garages, dealers, service stations, and public sector accounts.

AutoZone has been a great investment success story and qualifies as a Gunderson Trophy Winner for its strong record of performance. The company just reported its Q2 earnings results on March 3. Its EPS grew an impressive 15.6% YOY and revenue also increased 7.7% YOY to $2.14 billion. Both results came in higher than analyst expectations.

AutoZone is not the ONLY automotive parts retailer. It competes with O’Reilly Automotive Inc (NASDAQ:ORLY), Advance Auto Parts, Inc. (NYSE:AAP), and Pep Boys- Manny Moe and Jack (NYSE:PBY). Advance Auto Parts actually claims the title of largest operator in the U.S, but it experienced a weak 2Q. But AutoZone is the king of gross margin, coming in at 52.2% this quarter due to higher merchandising margins, versus only 51.7% for ORLY and 44.9% for AAP. AutoZone has worked hard to improve its inventory supply chain and it has paid off. Its expanded hard parts inventory is also contributing to its sales success.

AutoZone also provides specialty tools through its Loan-a-Tool program. This along with free services such as checking engine lights, battery charging, and oil recycling, helps drive traffic into the store. Same store sales for the quarter increased 3.6% which was better than Advance Auto’s +1.1% weak result.

On the heels of the good quarter, several analysts upgraded and raised price targets on the stock. There are a lot of positive catalysts the company such as lower gas prices, rising incomes and confidence, increases in miles driven and average vehicle age which all bode well for AutoZone’s business going forward.

One additional benefit to shareholders is the company’s stock repurchase program. AutoZone repurchased 43,000 shares during the quarter and YTD, it has bought back 614,000 shares. The company just authorized an additional $750 million share repurchase.

So even though AutoZone stock has had a run-up lately and is trading near a 52-week high, its recent numbers did not disappoint helping to justify current price levels.


Let’s take a closer look at AutoZone.


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AutoZone is a specialty retailer in the Automotive sector. It is a Large Cap stock with a market cap of $21.7 billion. Its risk category is Moderate and I own AutoZone in my Conservative Growth accounts. The stock is a Gunderson Trophy Winner given its consistent record of long-term outperformance.


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Given its long and strong record of performance, AutoZone is rarely cheap. Currently it receives a Value Grade of C+ based on recent valuation levels. Its trailing PE is 20 and its forward PE is 17 however, which is not that far out of line relative to its peers.


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Over the last year, AutoZone is up over 32%. YTD its performance is still way ahead of the S&P 500 and most other retailers, up 10.4%. It rates a Momentum Grade of A- and a Performance Grade of A-.


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AutoZone ranks #61 out of more than 4000+ stocks in the Best Stocks Now universe. Its Stock Grade is A- and it receives a Buy rating.

Given its recent results and all the things it has going for it, AutoZone still appear to be in the growth zone and remains an example of a Best Stock Now!