UBS analysts reacted positively to Autozone Inc’s fourth-quarter 2023 earnings per share, which beat estimates driven by its gross margin strength despite what they believe were unfavorable weather conditions in certain regions that pressured the first half of the quarter.
In an update to clients, they noted that Autozone opened the majority of its mega hubs in the last few weeks of 4Q, which should help the aftermarket automotive parts and accessories retailer sustain share gains within the Do It For Me (DIFM) segment for an extended period while acting as a positive driver for the stock over time.
"Overall, we think Autozone continues to gain share despite a challenging macro environment and is managing profitability nicely," the analysts wrote.
They remain confident over time Autozone's DIFM sales growth will continue, which should favorably impact the stock's earnings multiple.
Analysts at UBS also wrote that the company added 96 stores during the quarter and bought back $1.0 billion of its stock, which helped lower its share count by about 8% year over year.
However, they added that Autozone's priority to reaccelerate growth in its DIFM segment to double digits may require more investment into stores and megahubs, which could limit share repurchase growth.
Autozone shares climbed 4% to $2575 in midday trading on Wednesday and have gained 6% year to date.
Contact Sean at sean@proactiveinvestors.com