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AutoZone's Board Approves Additional $1.25B Share Buyback

Zacks Equity Research

AutoZone, Inc. AZO recently authorized the repurchase of an additional $1.25 billion worth of shares under its ongoing stock buyback program. The share repurchase program was first started by the company in 1998.

As of now, AutoZone has authorized $23.2 billion in share repurchases. At the end of the last reported quarter, it had shares worth $476.8 million remaining under the current repurchase authorization.

The company’s efforts to consistently enhance long-term shareholder value are impressive. Notably, last year, it expanded the repurchase program by an additional $1 billion. The company’s commitment to return capital to shareholders has been boosting investors’ confidence, as is evidenced by its share price movement. Notably, over the past year, its shares have outperformed the industry it belongs to. Over this period, shares of the company have gained 37.6% while the industry grew 19%.

AutoZone’s strong financials and robust earnings growth provide it with high financial liquidity to return excess cash to shareholders. It has an impressive earnings surprise history, having surpassed estimates in each of the trailing four quarters.  In the last reported quarter, the company witnessed year-over-year earnings and sales growth of 21.84% and 12.05%, respectively.

Its store expansion initiatives, fast delivery and high-quality products are aiding top-line growth. Additionally, the company’s omni-channel efforts to improve customer shopping experience are boosting its bottom line, thereby improving investors’ confidence.

While the aforementioned factors are working in favor of the automotive aftermarket parts and accessories retailer, it is bearing the brunt of high capital and operating expenses. The rising U.S- Sino trade tensions are likely to affect the company’s performance. Tariff impact on auto parts due to the U.S.-China trade war, and looming tariff conflicts from Japan and the European Union may eat into some of the profits of the firm, going forward.

Zacks Rank & Stocks to Consider

AutoZone currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Auto-Tires-Trucks sector are BRP Inc DOOO, currently sporting a Zacks Rank #1 (Strong Buy), and Lithia Motors LAD and CNH Industrial N.V. CNHI, carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BRP has an expected earnings growth rate of 17.2% for 2019. The company’s shares have gained 48.7% year to date.

Lithia Motors has an expected earnings growth rate of 12.9% for 2019. The company’s shares have gained 63.2% year to date.

CNH Industrial has an estimated earnings growth rate of 6.2% for 2019. Its shares have gained 7.2% year to date.

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