Autozone stock reiterated a top pick after a solid Q4

Shares of Autozone Inc (NYSE: AZO) are marginally in the red at writing even though the auto parts retailer reported market-beating results for its fourth financial quarter on Tuesday.

Wedbush analyst likes Autozone stock

The stock is not celebrating perhaps because of the company’s domestic commercial business.

That segment brought in $1.499 billion in the recently concluded quarter – down a more than expected 3.9%. Still, Seth Basham of Wedbush Securities said on Yahoo Finance Live today:

75% of their sales are to the retail consumer. Retail consumer spending on auto parts should be better trending than it has for the last two years. So, we expect that to be a positive for Autozone.

The analyst counts Autozone stock one of his top picks in auto parts retailers and sees upside in it to $2,750 – about a 10% premium on its current price.

Autozone Q4 earnings snapshot

• Earned $865 million versus the year-ago $810 million
• Per-share earnings also climbed from $40.51 to $46.46
• Net sales jumped 6.4% year-on-year to $5.69 billion
• Consensus was $45.17 a share on $5.61 billion revenue
• Ended Q4 with inventory up 2.2% due to new stores
• Same-store sales were up 4.5% – well ahead of estimates

A non-cash LIFO benefit helped Autozone improve its gross margin in the fourth quarter, as per the press release. According to Wedbush’s Basham:

Their overall comparable-store sales relative to peers – we’re talking about trends that are a little bit better than the likes of Advanced Auto Parts … and we like the valuation discount to O’Reilly.

Autozone stock is currently down about 8.0% versus its year-to-date high.