There are very few stocks in this market that continue the bull market ride; AutoZone, Inc. (NYSE:AZO) is one of them.
The company just released more good financial results, and the numbers make sense. In a slow-growth world where Main Street after-tax incomes aren’t growing, do-it-yourself replacement parts and accessories for cars and trucks is a growth business.
AutoZone has quite simply become an institutional favorite in this market.
Can AutoZone, Inc. Keep Up the Momentum?
According to Wall Street estimates, AutoZone should be able to produce another low double-digit gain over the fiscal year just ended.
And that’s on a mid-single-digit expected comparable gain on total sales.
AutoZone is one expensively priced stock. It currently trades just north of $700.00 a share. But the company continues to aggressively buy back on its common shares at the end of the day. In its fiscal fourth quarter just ended, AutoZone bought back $430 million of its shares at an average price of $680.00 apiece.
Its latest quarter ended August 29, 2015 saw comparable same-store sales grow 4.5% in the domestic market. This is pretty solid.
This fiscal year just ended produced a 7.5% gain in comparable total sales of $10.2 billion.
AutoZone’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
With no more wind at your back for your portfolio in this stock market, individual stock selection is absolutely critical.
What AutoZone has proven is that the business can grow above the rate of the general economy and that its fundamentals remain intact. Therefore, this stock can keep ticking higher going into next year and is worth looking at on material price retrenchments.
Advance Auto Parts Inc. (NYSE:AAP) is a good comparable for the company. It’s not quite as large in terms of stock market capitalization, but the stock has also been on a tear these last few years.
Specialty retailers can work nicely in slow-growth environments. In this particular case, a company like AutoZone is selling not only to do-it-yourself individual customers, but also to chain repair garages, dealers, and sole proprietorship service stations.
That’s good coverage for a business, selling to many facets of the industry.
For quite a number of years now, AutoZone has been opening approximately 150 new stores every year in the U.S. market. For such a mature industry, total net store growth is impressive.
The competition also growing its sales and earnings at an above-economy rate is a telling indicator about the auto parts business.
There’s a lot more room for growth in this industry. And it’s why an existing stock market winner like AutoZone is worth considering when it’s down in price.
There’s certainly one attribute about this stock market that’s now stalled; institutional investors continue to rally around existing winners. AutoZone might consolidate in price near-term, but it’s got further growth prospects going into next year.