AutoZone shares rise after strong 4Q earnings, analyst upgrade

Autozone shares up after strong earnings

DETROIT — Shares of AutoZone Inc. rose Wednesday after an R.W. Baird analyst raised his one-year price target following the auto parts chain’s strong earnings in its fiscal fourth quarter.

THE SPARK: Analyst Craig Kennison, in a note to investors, raised his share price target to $246 from $225 after AutoZone reported Tuesday that profits were up almost 14 percent due to brisk sales of do-it-yourself repair parts. Net income rose to $268.9 million, or $5.66 per share, for the 16 weeks ended Aug. 28.

THE BIG PICTURE: Kennison wrote that AutoZone earnings topped his forecast of $5.49 per share on 6.7 percent domestic same-store revenue growth and an aggressive stock buyback plan. Also, hot weather across the nation helped make parts on aging cars fail, driving sales as frugal consumers continue to hold onto their cars longer. He said the company is the leading cash-flow engine in the auto parts retail sector, generating $1.2 billion from operations.

THE ANALYSIS: Kennison maintained his “Outperform” rating on the Memphis, Tenn., company and raised his fiscal year earnings forecast from $17.05 to $18 in 2011.

Also Wednesday, Wedbush analyst Camilo Lyon wrote that AutoZone shares could stall if there’s a shift in consumer spending away from repair projects around the holidays. Wedbush maintained a neutral rating. It said AutoZone “continues to execute at a high level” but the risk-reward is relatively unattractive.

SHARE ACTION: AutoZone shares rose $3.17, or 1.5 percent, to $220.19 in midday trading.