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AutoZone (AZO) Q4 Earnings: Is a Disappointment in Store?


AutoZone, Inc. AZO is expected to report fourth-quarter (ended Aug 27, 2016) fiscal 2016 results on Sep 22, before the opening bell. In the last quarter, the company’s earnings met the Zacks Consensus Estimate. However, it managed to beat earnings in each of the three quarters prior to that, delivering a positive average surprise of 1.31% over the last four quarters. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

AutoZone’s earnings per share have grown in double digits for 39 consecutive quarters. However, the company has been facing significant currency headwinds related to the Mexican peso. Its EBIT was affected by 1% in both the first and third quarters, and 2% in the second quarter of fiscal 2016 due to currency headwinds. Management expects this pressure to continue until the peso drops from the elevated level.

Also, AutoZone expects its capital and operating expenses to rise over the next three years, backed by its plans to open two to three new distribution centers over this time frame. Further, the company is increasing the frequency of deliveries to its stores to three or five times a week from once. This will lead to gross margin headwinds of around 20–30 basis points every quarter until the completion of the roll-out.

AUTOZONE INC Price and EPS Surprise

AUTOZONE INC Price and EPS Surprise | AUTOZONE INC Quote

Earnings Whispers

Our proven model does not conclusively show that AutoZone is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: AutoZone has an Earnings ESP of -1.33%. This is because the Most Accurate estimate is $14.12, while the Zacks Consensus Estimate is pegged at $14.31.

Zacks Rank: AutoZone carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ferrari N.V. RACE, which will report third-quarter 2016 results on Oct 26, has an Earnings ESP of +1.75% and a Zacks Rank #2.

Superior Industries International, Inc. SUP has an Earnings ESP of +10.00% and a Zacks Rank #1. The company will report third-quarter 2016 financial numbers on Nov 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Magna International Inc. MGA has an Earnings ESP of +0.83% and a Zacks Rank #2. The company is expected to release third-quarter 2016 results on Nov 3.

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