Earnings Stock to Watch: AutoZone, Inc. (NYSE: AZO)

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AutoZone, Inc. (NYSE: AZO) stock fell over 1.3% on 23rd September, 2020 (as of 10:33 am GMT-4; Source: Google finance) despite the company posting better than expected earnings for the fourth quarter of FY 20. During the fourth quarter of 2020, the company has opened 49 new stores in the U.S., 11 stores in Mexico and five stores in Brazil. At the fiscal year end, the Company had 5,885 stores in the U.S., 621 stores in Mexico and 43 stores in Brazil for a total count of 6,549. Same-store sales were up 21.8% compared to last year’s fourth quarter. The company has reported 31% increase in net income for the fourth quarter over last year’s quarter to $740.5 million. Debt outstanding at the end of the fourth quarter was $5.513 billion, which reflects $307 million above last year’s Q4 ending balance of $5.206 billion. The company has generated $1.417 billion of operating cash flow, which is an increase of approximately $600 million over last year’s Q4, with an extra week. Net fixed assets were up 2.5% versus last year. Capital expenditures for the fourth quarter were of total $183.8 million and driven by an additional expenditures required to open 65 net new stores this quarter, capital expenditures on existing stores, Hub and MegaHub remodels or openings, work on development of new stores for upcoming quarters and information technology investments.

AZO in the fourth quarter of FY 20 has reported the adjusted earnings per share of $30.93, beating the analysts’ estimates for the adjusted earnings per share of $24.79, according to figures compiled by Thomson Reuters. The company had reported the adjusted revenue growth of 14 percent to $4.55 billion in the fourth quarter of FY 20. Gross margin for the fourth quarter was 53.1% of sales, which was down 31 basis points compared to last year’s fourth quarter on a 16 week basis. This past quarter’s gross margin had included about $4 million in charges related to damage from civil unrest. The the decrease in gross margin was due to lower merchandise margins driven mainly by a shift in mix.

Additionally, due to the uncertainty caused by the COVID-19 global pandemic, AZO did not repurchase any shares during the fourth quarter. For the fiscal year 2020, the Company had repurchased 826 thousand shares of its common stock for $930.9 million, at an average price of $1,127 per share. At the end of year 2020, the Company had $796 million remaining under its current share repurchase authorization.

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