AutoZone’s 1Q18 Results Didn't Boost Investors’ Confidence

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Part 5
AutoZone’s 1Q18 Results Didn't Boost Investors’ Confidence PART 5 OF 7

Could AutoZone’s Sales Grow after Its 1Q18 Earnings?


As we discussed in the first part of this series, AutoZone’s (AZO) 1Q18 earnings weren’t able to boost investors’ confidence despite positive growth in earnings and sales. The company has a stable business model with low investment requirements to drive growth—compared to the auto manufacturing business. In this part, we’ll see what analysts expect from AutoZone’s upcoming earnings.

Could AutoZone&#8217;s Sales Grow after Its 1Q18 Earnings?

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2Q18 estimates

According to Wall Street analysts’ consensus estimates, the positive trend in AutoZone’s earnings is expected to continue in 2Q18. Analysts expect its 2Q18 adjusted earnings to be at $8.39 per share, which is ~3.8% higher from $8.08 reported in 2Q17. However, analysts’ estimates for the company’s 2Q18 profitability reflect a negative trend. According to the estimates, AutoZone’s 2Q18 operating profit margin could be 16.6%—compared to 16.8% a year ago and 18.1% in 1Q18.

Overall, these earnings estimates indicate temporary near-term weakness and a gradual long-term recovery.

Positive sales growth expectations

Analysts expect AutoZone’s sales to continue to grow positively in 2Q18. Estimates suggest that the company’s 2Q18 revenues should be at $2.4 billion—up ~4.2% YoY (year-over-year). Its 3Q18 revenues should be at $2.7 billion with an increase of ~4.5% YoY.

In the first eleven months of 2017, US auto sales fell mainly due to weakness in small car demand. Lower US auto sales also had a negative impact on mainstream auto companies’ (IYK) revenues including General Motors (GM), Ford (F), and Fiat Chrysler (FCAU) in recent quarters.

In the next part, we’ll discuss how AutoZone’s valuation multiples look after its 1Q18 results.


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