AutoZone (AZO) began 2018 on a positive note, just like its peers Advance Auto Parts (AAP) and O’Reilly Automotive (ORLY). AZO stock rose 7.6% in January 2018, but those gains were erased in February when the stock fell 13.2%, mainly due to weaker-than-expected fiscal 2Q18 earnings.
In the first half of 2017, AZO stock fell 27.8%, but it had a sharp recovery of 24.7% in the second half of the year. The gains in the second half of 2017 were much better than AAP, ORLY, and General Motors (GM). ORLY and GM rose 10% and 17.3%, respectively, while AAP fell 14.5%.
Fiscal 2Q18 earnings miss
In fiscal 2Q18, which ended on February 10, 2018, AZO reported adjusted EPS (earnings per share) of $8.47. That was ~9.3% higher than $7.75 in fiscal 2Q17. In 1Q18, its adjusted EPS was $10, a ~6.8% rise YoY (year-over-year). The company missed Wall Street analysts’ EPS estimate for the third consecutive quarter.
Despite positive YoY growth in earnings, its third consecutive earnings miss could be driving bearish sentiment for AZO stock.
AZO’s fiscal 2Q18 revenues were $2.4 billion, about 5.4% higher than fiscal 2Q17. In fiscal 2Q18, its domestic same-store sales declined 2.2% compared to an increase of 2.3% in fiscal 1Q18.
Key focus areas
In AZO’s fiscal 2Q18 earnings conference call, management reiterated its plan to initiate about 150 new programs in fiscal 2018. Its store expansion program could help the company boost its sales growth and consumer base in the coming quarters. That could be one reason analysts are positive about AZO’s upcoming quarterly earnings. Analysts expect AZO’s fiscal 3Q18 adjusted earnings to be $13.05 per share, which is 14% higher than $11.44 reported in 3Q17.