AZO stock is the IBD Stock Of The Day as the auto parts retailer rises below a buy point with relative strength also trending higher.
AutoZone, a leading retailer and distributor of automotive replacement parts, is poised to keep growing earnings.
It has made an especially big effort to grow the commercial, or do-it-for-me, business, where sales grew 22% in the August quarter and 26.5% over the last four quarters. Its larger retail, or do-it-yourself, business grew 2% and 8.9% during the same periods.
It's also a defensive growth stock in the current market, where costlier cars and car loans are forcing drivers to hang on to their vehicles for longer. That means more demand for auto parts.
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The Stock Checkup tool shows that AutoZone stock is highly rated by IBD in terms of key ratings. It earns a 90 Composite Rating, 93 RS Rating, and also a 93 EPS Rating out of a possible 99.
Wall Street also likes the stock, with a consensus rating of overweight from 23 analysts. They expect AutoZone earnings to keep growing at a decent pace over the next couple years. That's a positive when investors fret that aggressive rate hikes by central banks and myriad macro and geopolitical headwinds could squelch U.S. and global growth.
Peer O'Reilly Automotive is set to report Oct. 26 after the market close.
AZO Stock
Shares of AutoZone added 1.6% to 2,282.76 amid the rebound rally on the stock market today.
AZO stock has formed a cup base with a 2,362.10 buy point after rallying from September lows. It may soon have a handle. Shares are holding above the 10- and 40-week moving averages in a volatile market, and are 3% below the cup-shape entry.
The relative strength line has moved higher since AutoZone stock began to base around Aug. 16, and is now making a new high. That is marked by a blue dot on the end of the RS line on the weekly MarketSmith chart.
A rising RS line shows a stock's outperformance vs. the S&P 500. It can be bullish sign ahead of a potential breakout. In a bear market, it signals the stock as a possible leader once the market shifts into an uptrend.
ORLY stock similarly is 2% away from a 750.98 flat-base buy point, with its RS line hitting a new high. But investors should be extremely cautious about making new buys when the market is in a correction.
The 93 Relative Strength Rating means that AZO stock has outperformed 93% of all stocks in IBD's database over the past year.
That is the second-highest RS Rating in its industry group, behind only a 94 for Genuine Parts. It's ahead of a 92 for O'Reilly stock, 75 for LKQ, 73 for Monro and 43 for Advance Auto Parts.
Auto parts stocks crashed in 2017 amid reports that Amazon could move into their business. Those fears haven't really materialized.
AZO stock shows at least seven quarters of rising fund ownership.
AutoZone Earnings
The auto parts retailer earns a superior IBD Composite Rating of 90, out of a highest-possible 99. The Comp rating combines key fundamental and technical metrics in a single easy-to-use score.
On Sept. 19, AutoZone topped earnings views for its fiscal fourth quarter, maintaining a nearly unblemished record of earnings beats over the last five years. Same-store sales increased 6.2%, growing both year over year and quarter over quarter.
"Our retail business performed well this quarter ending with positive same-store sales on top of last year's strong performance," CEO Bill Rhodes said in an earnings release.
He added: "Our commercial business growth continued to be exceptionally strong at 22%. The investments we have made in both inventory availability and technology are enhancing our competitive positioning. We are optimistic about our growth prospects heading into our new fiscal year."
Analysts polled by FactSet expect AutoZone earnings per share to decline in the current quarter and next. But in all of 2023, they expect AutoZone EPS to grow 5.7%, rising a further 15% in 2024. Revenue is seen advancing 5% in both 2023 and 2024.
In a highly volatile market, AutoZone shares rose 4.96% over the past three months. Year to date through Oct. 12, AZO stock bears a 7.1% gain vs. a 24% decline for the S&P 500.
To find other highly rated defensive growth stocks, check out the IBD 50 list. It currently holds names such as Deckers Outdoor, Tuesday's Stock of the Day.
