AutoZone $AZO just reported mixed results, narrowly beating on revenue but missing earnings.
Once again, the stock was punished, marking the 4th negative earnings reaction in the last 5 quarters.
That’s a clear trend.
The core business remains solid.
The company continues to grow steadily, expand its store base, and generate strong free cash flow.
Their relentless focus on cost control and one of the market's most aggressive share repurchase programs has helped drive long-term shareholder value for decades.
But right now, the market is focused elsewhere.
Margins are under pressure, especially in the commercial segment, where growth has been decelerating. And with comps getting tougher and operating expenses creeping higher, even a slight EPS miss is enough to trigger a selloff.
This isn’t a question of survival because it remains one of the most efficient retail operators.
But investors are clearly demanding more than stability.
In a market that’s rewarding accelerating growth and margin expansion, good just isn’t good enough anymore.
Until the narrative shifts, the stock may continue to struggle with upside follow-through, even if the fundamentals hold steady.
So what else did we learn from this earnings report? Let’s dive into the details.
Here are the latest earnings stats for AZO 👇
*Click the image to enlarge it
Autozone had a -4.62 reaction score after reporting mixed results.
The company reported revenues of $4.46B, versus the expected $4.42B, and earnings per share of $35.36, versus the expected $37.11.
Now let's dive into the data and talk about what happened with this report 👇
AZO has been punished for 4 of its last 5 earnings reports:
Autozone fell 3.4% after this earnings report, and here's why:
Despite strong sales growth (total company same-store sales up 5.4%), operating profit and net income declined.
Gross margin declined by 77 basis points to 52.7%, mainly due to higher inventory shrinkage.
The company accelerated new store openings, adding 54 stores in the U.S., 25 in Mexico, and 5 in Brazil, for a total of 84 net new stores in the quarter. This led to a 10.8% year-over-year increase in inventory.
This company has been one of the best growth stories in retail over the last decade, but it's currently facing significant growth pains.
The consistent negative earnings reactions over the last 5 quarters highlight that the market doesn't love this fundamental story right now.
As you can see on the chart, the price has been in a secular uptrend for years.
However, the relative trend just failed to hold a breakout from a multi-year base. We think this is a signal for potential weakness in the absolute trend.
If AZO is above 3,182, the path of least resistance will likely remain higher to sideways for the foreseeable future.
Thank you for reading.
- The Beat Report Team
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