UBS lowers AutoZone stock price target to $4,800 on LIFO charges

Investing.com - UBS maintained its Buy rating on AutoZone (NYSE:AZO) stock but lowered its price target to $4,800 from $4,925 on Wednesday. The stock, currently trading at $4,109, has delivered impressive returns with a 35% gain over the past year and nearly 29% year-to-date, according to InvestingPro data.

The firm cited non-cash charges associated with LIFO accounting as the primary reason for the target adjustment, while noting these pressures are likely temporary and could eventually reverse to drive significant earnings growth.

UBS highlighted AutoZone’s strong comparable sales growth of 4.8% in the fourth quarter, indicating the auto parts retailer is making solid progress on key investments expected to drive continued market share gains over the next several years.

The research firm acknowledged that while near-term GAAP estimates may move slightly lower, the inflation driving these accounting adjustments should benefit the company’s top-line performance. For deeper insights into AutoZone’s valuation and growth prospects, InvestingPro subscribers have access to 12 additional exclusive tips and comprehensive financial analysis.

UBS also noted that AutoZone’s accelerated store growth strategy will likely result in higher SG&A per store, but called this "the right decision over the longer-run" and expressed confidence the company can maintain its double-digit EPS growth formula despite these temporary margin pressures.

In other recent news, AutoZone has reported its fourth-quarter earnings, revealing strong top-line results despite challenges with margins. The company experienced lower EBIT margins due to LIFO accounting impacts and ongoing investments, as noted by TD Cowen, which maintained its Buy rating with a price target of $4,900. Guggenheim also maintained a Buy rating, raising its price target to $4,600, citing AutoZone’s double-digit domestic commercial net sales growth and gross margin expansion. Conversely, Raymond James lowered its price target to $4,800, attributing the adjustment to larger-than-anticipated LIFO charges, while emphasizing these as non-cash accounting factors. Jefferies increased its price target to $4,750 despite AutoZone’s earnings per share of $48.71 falling short of the consensus estimate. Truist Securities lowered its price target slightly to $4,499, acknowledging the solid fourth-quarter results but noting the impact of non-cash LIFO charges on margins. These recent developments reflect varying perspectives on AutoZone’s financial performance and future prospects.

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