BMO Capital lifts AutoZone stock target to $4,100, keeps Outperform

On Tuesday, BMO Capital Markets updated its outlook on AutoZone shares (NYSE:AZO), raising the price target to $4,100 from the previous $3,850, while reaffirming an Outperform rating on the stock. According to InvestingPro data, AutoZone, with a market capitalization of $61.9 billion and a P/E ratio of 24.13, has demonstrated strong performance with a 32% return over the past year. The company’s current stock price of $3,695.66 sits near its 52-week high of $3,916.81. The adjustment follows AutoZone’s fiscal third quarter 2025 earnings report, which revealed earnings per share below analysts’ expectations. Despite these challenges, InvestingPro analysis shows the company maintains a healthy gross profit margin of 53.13% and generates substantial free cash flow of over $2 billion. The company encountered margin pressures due to a shift toward more commercial sales, currency exchange fluctuations, and ongoing investments aimed at growth.

Tristan Thomas-Martin of BMO Capital provided insights into the automotive parts company’s recent performance and future prospects. He acknowledged the challenges that impacted AutoZone’s margins in the recent quarter, including the shift towards commercial sales, foreign exchange headwinds, and the company’s continued investments in growth. Despite these issues, Thomas-Martin expressed confidence in the long-term outlook for AutoZone, citing the company’s potential to further capture market share in what remains a fragmented industry landscape.

The analyst also noted that while these factors are expected to continue affecting AutoZone in the fiscal fourth quarter of 2025, the forecast for earnings growth remains positive. BMO Capital slightly reduced its earnings forecast for the upcoming quarter but introduced its fiscal year 2027 estimates. These new estimates contributed to the decision to increase the target price for AutoZone shares.

Thomas-Martin’s commentary on the price target increase emphasized the firm’s expectations for AutoZone’s sustained earnings growth. "We are slightly lowering our FY4Q25 forecast, but introducing our FY2027 estimates, which in turn is increasing our target price to $4,100," he stated. This reflects a belief in the company’s ability to overcome short-term headwinds and continue its trajectory of earnings expansion.

AutoZone’s performance and the revised price target by BMO Capital Markets will be closely watched by investors as the company navigates the competitive landscape of the automotive parts industry, aiming to maintain its growth amid the challenges of shifting market dynamics and investment strategies. With an InvestingPro Financial Health Score rated as "GOOD" and analyst consensus remaining bullish, investors seeking deeper insights can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports, available for over 1,400 US stocks including AutoZone.

In other recent news, AutoZone Inc. reported its third-quarter earnings for 2025, revealing a mixed financial performance. The company saw its revenue rise to $4.46 billion, surpassing expectations, while earnings per share (EPS) fell short at $35.36 compared to the anticipated $37.10. Analysts from Barclays (LON:BARC) and Truist Securities have responded by adjusting their price targets, with Barclays raising it to $3,916 and Truist to $4,038, both maintaining positive ratings on the stock. CFRA, however, slightly reduced its price target to $4,200 due to the earnings miss but still holds a Buy rating.

AutoZone’s domestic comparable store sales experienced a notable 5.0% increase, with international sales also showing strength. However, the company’s gross margin contracted by 80 basis points, attributed to foreign exchange headwinds and margin pressures. Despite these challenges, analysts from Truist Securities are optimistic about margin stabilization in upcoming quarters, while Barclays highlights AutoZone’s significant market share gains.

The company has been actively investing in strategic initiatives, resulting in market share gains and sales growth across various channels. Analysts continue to express confidence in AutoZone’s strategies, with Truist Securities noting potential tariff-related price increases as a possible boost. Overall, these developments indicate a complex landscape for AutoZone, with both challenges and opportunities on the horizon.

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