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On Tuesday, AutoZone Inc. (NYSE: NYSE:) received a price target increase from CFRA, with the new target set at $3,200, up from the previous $3,000, while the firm maintained a Buy rating on the stock. The adjustment follows AutoZone’s impressive fiscal second-quarter earnings report, which surpassed analysts’ expectations, particularly due to robust margins and international sales growth.
CFRA’s revised price target is based on an anticipated price-to-earnings (P/E) ratio of 19.0x for fiscal year (FY) 2025, which ends in August. This represents a premium over AutoZone’s five-year mean forward P/E of 17.8x.
The firm justifies this higher valuation with the auto parts retailer’s expanding international presence. Moreover, CFRA has increased its earnings per share (EPS) estimates for AutoZone to $154.85 from $152.65 for FY 2024, and to $168.00 from $163.20 for FY 2025.
AutoZone’s fiscal second-quarter earnings, reported earlier, showed an EPS of $28.89, a 17% increase over the prior year’s $24.64 and well above the consensus estimate of $26.50. This earnings beat was largely attributed to stronger-than-expected profit margins.
Revenue for the quarter grew 4.6% to $3.86 billion, marginally topping the consensus by $10 million, driven by a 3.0% rise in same-store sales (SSS) and a gross margin expansion of 160 basis points to 53.9%, which was 100 basis points ahead of consensus.
The company’s international SSS saw an impressive surge of 23.9%, which significantly contributed to the overall performance and helped balance the modest domestic SSS growth of 0.3%. AutoZone has been consistently delivering strong financial results, as highlighted by the fact that this quarter marked its 24th consecutive earnings beat.
CFRA notes AutoZone’s robust international growth as a key factor in their positive outlook, along with the aging U.S. vehicle fleet, which averaged 12.5 years in 2023, likely to bolster domestic business.
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