Autozone Drives To New High Autozone (NYSE: AZO) has been winning since long before the pandemic began and it looks like it will keep on winning long into the future. The company is not only...

Autozone Just Keeps Getting Better

Autozone (NYSE: AZO) has been winning since long before the pandemic began and it looks like it will keep on winning long into the future. The company is not only growing at a double-digit rate but well above the consensus and all the signs are positive. With revenue, earnings, and cash flow all on the rise we expect the robust share repurchase program to continue as well. The takeaway is that share prices are moving higher and could easily gain another $150 to $200 in the very near term.

Autozone Smokes The Consensus

Autozone has been growing very steadily for a long-time but got a real boost from the pandemic. The company's growth was accelerated into the double-digit range and that pace has so far been sustained. The FQ1 revenue of $3.67 billion is down on a sequential basis but up 16.5% from last year and last year's revenue was up a similar amount. Revenue was driven by strength in all channels and beat the consensus by 860 basis points as well. On a comp basis, sales are up 13.6% and are aided by an increased store count. The company opened 18 new stores bringing the total to 6,785. The Commercial segment, the company's hottest growth avenue, saw its revenue rise by 29.4% and the company is still investing in the business.

Moving down the report, Autozone's gross margin contracted by 65 basis points but there is a mitigating factor. The contraction is due to growth efforts centered on the Commercial business and should result in increased revenue as soon as the current quarter. At the operating level, SG&A contracted by 170 basis points as a percentage of revenue-driving strong gains in operating profits and earnings. The company's operating profit increased 22.6% to outpace revenue by some 700 basis points and deliver GAAP earnings above the Marketbeat.com consensus. The GAAP EPS of $25.69 is up 38% from last year and beat by $4.73.

Autozone doesn't give guidance but it doesn't matter. The company is expected to grow both organically and via expansion in the U.S. and domestically. The key takeaway is that cash flow and FCF are on the rise and fueling a strong buy-back program that we see no end to. The company bought back nearly $1 billion in shares during the last quarter and still has over $1 billion remaining under the current authorization. Considering the health of the balance sheet we'd be surprised if another authorization wasn't given by the end of the next quarter.

The Analysts Consensus Is Lagging The Autozone Market

The analysts are bullish on Autozone and have been raising their price targets but the Marketbeat.com consensus estimate is still lagging behind the price action. The consensus target is near $1,729 compared to the recent price action above the $2,000 mark. The high price target is, notably, $2,050 and in line with the current action. There have been no analysts upgrades or target adjustments since the earnings report was released but we are expecting to see some action soon. The last 9 reports, issued since the last earnings release, all include price target increases and amount to an Outperform/Overweight rating.

The Technical Outlook: Autozone Sets New High

Shares of Autozone advanced more than 7.0% following the Q1 release and are likely moving higher. The move confirms the underlying uptrend and is supported by bullish crossovers in the indicators. It is our opinion the stock will move up to the $2100 level before hitting serious resistance and it may move higher after some consolidation.