On Tuesday, Citi reaffirmed its Buy rating and $3,500.00 price target for AutoZone (NYSE:AZO), following the company's release of its first-quarter results.
The automotive parts retailer showed mixed performance, with domestic same-store sales (SSS) growth of 0.3%, which was at the lower end of the market's flat to 1% expectation range. The modest increase was attributed to weaker-than-anticipated demand from professional mechanics, known as Direct to Installer (DIFM), while the do-it-yourself (DIY) segment performed slightly better than expected.
AutoZone's earnings per share (EPS) fell short of Wall Street's forecasts, primarily due to a higher tax rate. However, earnings before interest and taxes (EBIT) slightly surpassed expectations by 0.7%, driven by better gross margin rates stemming from increased merchandise margins. Citi's analyst viewed these results as more or less aligned with market expectations and indicated a neutral market reaction.
The analyst is looking forward to additional details from AutoZone's management. Key points of interest include the monthly breakdown of same-store sales performance, further discussion on improving trends in the DIFM segment towards the end of the quarter, and forecasts for gross margin throughout the remainder of the fiscal year. Additionally, insights into inflation on the same SKU and any industry-related commentary that might have implications for AutoZone's peers are also anticipated.
AutoZone's latest financial disclosure provides a glimpse into the current state of the automotive aftermarket industry. The company's performance, especially in the context of same-store sales and gross margins, offers investors and analysts a basis to gauge the sector's health and the company's positioning within the market. As such, Citi's continued endorsement of AutoZone with a Buy rating and a substantial price target suggests confidence in the company's strategy and market standing.
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