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On Tuesday, CFRA analyst Garrett Nelson revised the price target for AutoZone (NYSE:AZO) shares to $4,200, a slight decrease from the previous $4,225, while maintaining a Buy rating on the stock. With a market capitalization of $61.2 billion and a P/E ratio of 23.9x, InvestingPro analysis suggests the stock is currently trading above its Fair Value, despite maintaining a "GOOD" overall financial health score. The adjustment comes after the company reported its May-Q adjusted earnings per share (EPS) of $35.36, which fell short of the anticipated $37.01 consensus. The earnings miss was attributed to weaker-than-expected margins, despite a 5.4% increase in revenue to $4.46 billion.
AutoZone’s domestic comparable store sales experienced a notable 5.0% rise, exceeding consensus expectations by 240 basis points. However, the company’s gross margin contracted by 80 basis points to 52.7%, which was 70 basis points below the consensus. This decline in gross margin was a contributing factor to the earnings miss for the quarter.
Despite the lower-than-expected margins, the highlight for AutoZone was the significant growth in domestic comparable store sales, marking the strongest rate of increase since late 2022. Management attributed this performance to successful same-store sales growth initiatives and improvements in net inventory metrics.
Looking ahead, AutoZone’s management expressed optimism regarding the company’s prospects. They have guided for an improvement in gross margins as new distribution centers become operational and efforts to drive higher merchandise margins continue. The company’s strategies appear to be paying off, leading to a positive outlook from CFRA.
Nelson justified the new price target based on a forward P/E of 24.5x for FY 26, which represents a premium to AutoZone’s historical average multiples. Additionally, EPS estimates were revised, with a reduction to $148.25 from $152.10 for FY 25 and to $171.10 from $172.50 for FY 26. Despite these adjustments, CFRA reaffirmed its Buy opinion on AutoZone shares, signaling confidence in the company’s future performance. InvestingPro has identified several key strengths for AutoZone, including its position as a prominent player in the Specialty Retail industry and strong returns over the past decade. Subscribers can access 6 additional ProTips and a comprehensive Pro Research Report, offering deeper insights into AutoZone’s investment potential.
In other recent news, AutoZone Inc. reported its third-quarter 2025 earnings, highlighting a mixed financial performance. The company’s revenue exceeded expectations, reaching $4.46 billion against a forecast of $4.42 billion. However, earnings per share (EPS) fell short, coming in at $35.36 compared to the projected $37.10. Despite the revenue growth, the EPS miss was primarily attributed to foreign exchange headwinds. AutoZone’s domestic commercial sales grew significantly, marking a 10.7% increase for the quarter. The company also announced ongoing investments in technology and supply chain improvements, with plans to open 100 international stores this fiscal year. Analyst firms like Jefferies and JPMorgan engaged with AutoZone executives during the earnings call, discussing strategies to mitigate tariff impacts and enhance delivery speed. These developments reflect AutoZone’s commitment to growth, despite the challenges posed by foreign exchange rates and other market conditions.
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