Here's Why Investors Should Retain AutoZone Stock Right Now

AutoZone, Inc. AZO, a leading specialty retailer and distributor of automotive replacement parts and accessories, expects solid growth in fiscal 2025 due to continued strength across DIY and commercial businesses. However, high investments in the improvement of the electronic catalog might limit near-term cash inflows.Let’s see why you should hold on to this Zacks Rank #3 (Hold) stock for now.Strong DIY & Commercial Businesses Boost AZO’s ProspectsAutoZone has achieved record sales for 35 consecutive years. Its fiscal 2024 revenues of $18.5 billion rose 5.7% year over year. The company expects continued growth in fiscal 2025, driven by strong DIY and commercial business performance with expanded coverage and improved parts availability. Growth is supported by enhanced satellite store inventory, hub and mega-hub expansion, the Duralast brand’s success, faster delivery and improved customer service. In the first quarter of fiscal 2025, AutoZone launched 37 new commercial programs, reaching 5,935, with commercial operations now in more than 92% of U.S. stores, positioning it for robust sales growth.Focus on increasing its market penetration via the expansion of mega hubs is set to boost long-term prospects. Expanded hub and mega-hub rollouts, along with expansion of distribution center footprint, bodes well. With 111 mega hub locations at the end of the first quarter of fiscal 2025, AutoZone is halfway through its objective of establishing more than 200 mega hubs. The company’s international operations are growing, and it is allocating a significant portion of expansion funds to these regions. With continued dedication to Mexico and Brazil, AZO is set to ramp up store openings in these markets, aiming for as many as 200 annually by 2028, which is poised to significantly boost AutoZone's future growth.The company’s omni-channel efforts to improve customer shopping experience are reaping profits. The ramp-up of e-commerce efforts, including ship-to-home next day, buy online, pick-up in stores and commercial customer ordering, are driving traffic to the company’s online site, helping the company deliver sizzling growth. AutoZone's distribution network transformation, highlighted by the strategy to bring inventory closer to customers, will enhance efficiency and drive growth with increased availability and speed.AutoZone’s robust buyback program also sparks confidence. In the first quarter of fiscal 2025, the firm repurchased shares worth $505 million. At the end of the quarter, AZO had more than $1.7 billion remaining under share repurchase authorization. In June, the company authorized additional buyback of $1.5 billion shares. Notably, it has bought back more than 100% of the then outstanding shares since 1998. The company’s disciplined capital allocation approach to reinvest in the business and engage in meaningful investor-friendly moves is praiseworthy.High Capex & FX Fluctuations Remain Concern for AutoZoneAutoZone’s technology investments to improve the electronic catalog might limit near-term cash inflows. In fiscal 2024, the company spent more than $1 billion in capex and it expects to spend the same in fiscal 2025. The company also remains dedicated to investing in rapid store expansion, particularly in hubs and mega-hubs, bringing inventory closer to its customers, as well as enhancing distribution centers and IT systems. The company remains susceptible to foreign currency fluctuations. In the fiscal first quarter, foreign exchange rates in Mexico fell 13% against the U.S. dollar, creating a $58 million reduction in sales, a $17 million decrease in EBIT and a 68 cents per share drop in EPS compared to the previous year. At certain presumed spot rates, the company anticipates an estimated impact of $355 million on revenues, $120 million on EBIT and $4.90 per share on fiscal 2025 EPS.AZO’s Zacks Rank & Key PicksAutoZone currently carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the auto space are Canoo Inc. GOEV, Geely Automobile Holdings Limited GELYY and Blue Bird Corporation BLBD, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for GOEV’s 2024 sales and earnings suggests year-over-year growth of 264.56% and 75.58%, respectively. EPS estimates for 2024 have improved $27.41 in the past 60 days. EPS estimates for 2025 have improved $2.40 in the past seven days.The Zacks Consensus Estimate for GELYY’s fiscal 2025 sales and earnings suggests year-over-year growth of 60.04% and 138.89%, respectively. EPS estimates for fiscal 2025 and 2026 have improved by 63 cents and 62 cents, respectively, in the past 60 days. The Zacks Consensus Estimate for BLBD’s fiscal 2025 sales and earnings suggests year-over-year growth of 10.97% and 12.14%, respectively. EPS estimates for fiscal 2025 have improved 18 cents in the past 60 days.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AutoZone, Inc. (AZO): Free Stock Analysis Report Geely Automobile Holdings Ltd. (GELYY): Free Stock Analysis Report Blue Bird Corporation (BLBD): Free Stock Analysis Report Canoo Inc. (GOEV): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks