Wedbush Reaffirms Neutral On AutoZone Following F4Q14 Results

In a research repot released today, Wedbush analyst Seth Basham reaffirmed a Neutral rating on AutoZone (NYSE:AZO) with a $550 price target, following AZO’s release of its slightly disappointing quarterly earnings.

Basham wrote, “While EPS of $11.28 topped consensus of $11.25, comps of 2.1% fell short of consensus of 2.9%. The sales slowdown in the core DIY business for this quarter that spanned the summer (mid-May through August) should not come as a huge surprise as summer weather was unfavorable, as highlighted by industry peers. AZO will need to point to continued healthy underlying trends into September and plans to accelerate commercial growth to support the stock in the near term, in our view.”

Basham continued, “AZO offers a compelling capital allocation program and relatively low volatility, but we believe the company’s push to grow its commercial business may dilute returns on capital. As well, outside of near-term benefits due to weather, AZO’s higher exposure to the DIY segment relative to peers positions the company for slower relative growth; this is due to higher secular growth in the commercial segment (~4%) compared to the DIY segment (~1%).” Basham added, “As the industry leader in DIY, AZO’s comp miss may incrementally pressure shares of peers. Color from AZO on trends in August and September, which are in others’ current fiscal quarters, will be important near-term. We believe industry trends slowed as much as 200 bps from last winter and early spring as the benefits from the harsh winter weather faded, but this is largely reflected in consensus expectations for 2H14. Underlying industry trends remain relatively healthy.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Seth Basham has a total average return of 8.8% and a 75% success rate. Basham is ranked #1246 out of 3309 analysts.

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