The Ratings Game: AutoZone stock surges to record after retailer’s quarterly sales rise 6%

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AutoZone Inc. shares rallied more than 7% on Tuesday to hover at a record high, boosted by company quarterly results that quelled fears of margin pressure and showed a fifth straight quarter of double-digit growth for the auto parts retailer’s commercial sales.

AutoZone AZO, +6.75%  earlier Tuesday reported fiscal 2020 first-quarter GAAP profit and sales above Wall Street expectations, and said its U.S. same-store sales rose 3.4%. Results also included another surge in commercial sales.

The auto parts retailer reported per-share earnings of $14.30 on sales of $2.793 billion, a 5.7% increase on fiscal 2019 first-quarter sales. Analysts polled by FactSet had expected EPS of $13.70 on sales of $2.765 billion. The consensus was for a same-store sales increase around 2.5%.

The stock traded as high as $1,274.41 a share, the best performer on the S&P 500 index. SPX, +0.04%  A close around these levels would be a record high, based on data going back to 1991, and also the largest one-day increase since November 2008.

AutoZone’s quarterly results “checks all the boxes,” including 14% growth for commercial sales, the fifth consecutive quarter of double-digit growth for the segment, analysts at Instinet, led by Michael Baker, said in a note.

“(AutoZone) is underpenetrated in commercial, but is seeing outsized growth rates as initiatives around product availability and depth gain traction. This is a key part of our positive investment thesis,” the analysts said.

On top of that, the stock trades at a discount to peers, they said.

Bears “will have a hard time finding holes to poke” on Autozone’s results, said in a note analysts at Wells Fargo, led by Zachary Fadem. Growth in commercial sales was “a standout,” the Wells Fargo analysts said.

AutoZone shares have underperformed since the company reported fourth-quarter results, mainly on lingering fears of margin pressure, analysts at Credit Suisse said in their note.

Tuesday’s results “validate the sustainability of the commercial improvement story, more stable DIY trends than appreciated, and better alignment of investments and sales momentum,” said the analysts, led by Seth Sigman.

Shares of AutoZone have gained 50% this year, which compares with gains of 25% and 20% for the S&P 500 index and the Dow Jones Industrial Average DJIA, -0.01%  in the same period.

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