Jefferies Raises AutoZone Price Target to $4,255 Despite Earnings Miss

On May 28, Jefferies raised its price target for AutoZone, Inc. (NYSE:AZO) to $4,255 from $4,000. The firm maintained a Buy rating on the shares. The updated outlook comes despite AutoZone's Q3 earnings per share (EPS) of $35.36, falling short of the consensus estimate of $37.18.

The analysts focused more on the bright side of AutoZone’s (NYSE:AZO) Q3 2024 earnings results, which came out on May 27. The company’s sales grew by 5.4%, with the do-it-for-me (DIFM) sector posting a 10.7% increase and the do-it-yourself (DIY) sector growing by 3%.

But there are also problems with the earnings report, which Jefferies took note of. For instance, operating profit decreased 3.8% to $866.2 million during the quarter, and gross margin dropped by 77 basis points to 52.7%. AutoZone (NYSE:AZO) attributed the decline to higher inventory shrink, higher commercial mix, new distribution center startup costs, and a 21-basis point non-cash LIFO impact.

Despite these headwinds, Jefferies expressed confidence in AutoZone’s (NYSE:AZO) momentum heading into the fourth quarter. The firm cited the company's strategy to expand its market share in the fragmented DIFM sector. The analysts also cited the continued investment in megahub rollout to improve parts availability and delivery.

AutoZone, Inc. (NYSE:AZO) is an American retailer and distributor of automotive replacement parts and accessories. Based in Memphis, Tennessee, the retailer operates across more than 7,000 physical stores and online. It serves both individual car owners (DIY customers) and professional repair shops in the United States and select Latin American markets.

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