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AutoZone Drives on New Store Openings Despite Expense Woes

Zacks

On Mar 12, we issued an updated research report on AutoZone, Inc. AZO.

The company utilizes its strong cash position to open new stores every year. During second-quarter fiscal 2018, the company opened 35 new stores and closed one in the United States. The company also opened three new stores in Mexico and two in Brazil. As of Feb 10, the company had 5,514 stores across 50 states in the United States, the District of Columbia and Puerto Rico; 532 in Mexico; 26 Interamerican Motor Corp. branches and 16 stores in Brazil.

In the fiscal second quarter (ended Feb 10, 2018), the company reported adjusted earnings per share of $4.23, missing the Zacks Consensus Estimate of $8.81. Revenues rose 5.4% year over year to $2.41 billion in the reported quarter. The figure also surpassed the Zacks Consensus Estimate of $2.39 billion.

The company is well placed to grow its sales further in fiscal 2018. In the first two quarters of fiscal 2018, revenues improved 5.2% year over year to $5 billion. During the same period, same-store sales results showed an improved performance.

The company outperformed the industry it belongs to in the last six months. Its shares increased 16% compared with the industry’s growth of 10.4 %.

However, AutoZone’s plans of opening distribution centers are likely to escalate its capital and operating expenses over the next few years. The company is also investing in the development of mega-hub stores.

AutoZone currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

A few better-ranked stocks in the auto space are General Motors Company GM, Volkswagen AG VLKAY and AB Volvo VLVLY. While both General Motors and Volkswagen sport a Zacks Rank #1, AB Volvo carries a Zacks Rank #2.

General Motors has an expected long-term growth rate of 8.4%. Over the past year, shares of the company rose 2.3%.

Volkswagen has an expected long-term growth rate of 18.7%. The shares of the company gained 29.2% in the past year.

AB Volvo has an expected long-term growth rate of 15%. Over the past year, shares of the company rallied 32.6%.

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