Is Autozone a Buy After Its Latest Earnings Report?

AutoZone (NYSE:AZO) doesn't get a lot of fanfare on the stock market, but it's quietly been one of the best-performing stocks for decades.

Its hub-and-spoke business model, in which larger central stores can resupply satellite ones, consistent expansion, and steadily growing demand for aftermarket auto parts have made the company a winner over its history. The stock is up nearly 300% over the last decade.

However, over the last year, the company's winning ways have changed as the stock has fallen nearly 40% from its peak due to a stretched valuation and sluggish growth in the DIY sector as inflation has pinched consumers' wallets.

Against those concerns about slowing growth, AutoZone stepped up to deliver its fourth-quarter earnings Tuesday morning, and investors liked what they saw as the stock finished up more than 3% yesterday.

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AutoZone's fourth quarter was good enough

The company posted mixed results as it missed top-line estimates but beat on the bottom line. Revenue in the quarter was up 5.6% to $6.59 billion, which was short of the consensus at $6.7 billion.

Same-store sales increased 1.5% on a constant-currency basis in the quarter, and earnings per share jumped 15.1% to $56.05, topping estimates at $53.84.

However, the company benefited from tariff refunds that lifted its gross margin by 145 basis points, or a windfall of roughly $100 million. Without that, its EPS increase would have been much smaller.

AutoZone has a long track record of buying back its stock, and it continued to do so in the quarter, reducing shares outstanding by 3.3% over the last year.

The company doesn't give formal guidance, but said it expected first-quarter same-store sales to be relatively flat, with higher oil and gas prices weighing on traffic, though it expects the average ticket to be up 5%. It also called for gross margins to be flat to up 25 basis points in fiscal 2027.

Management remains confident in its long-term growth as it continues to aggressively open new stores. It opened 374 new locations in fiscal 2026, with about two-thirds of those in the U.S., giving it more than 8,000 stores globally. The company also operates in Mexico and Brazil.

In recent years, management has ramped up new store openings, as physical locations and scale are critical in its industry. That strategy has impacted margins, but management said it continues to execute well at the store level. In fiscal 2027, it plans to open 400 new stores, and it dialed down its target for fiscal 2028 from 500 to 430. After 2028, it expects the ramp in new store openings to moderate.

Whether the business does well in the coming years will be determined in part by the success of its new-store ramp, and management is committed to maintaining a return on invested capital (ROIC) in the mid-30s and growing it over the long term.

Is AutoZone a buy?

The auto parts industry is vulnerable to the macroeconomic climate, and steady inflation and higher interest rates seem to be weighing on AutoZone's sales growth.

However, the industry has also been historically resilient to downturns, as replacement parts are often a need, rather than a want. In tough times, consumers will delay buying new cars, meaning they'll spend more to keep their current one running.

I'd prefer to see stronger same-store sales growth from AutoZone, but its long-term track record speaks for itself, and investors will continue to benefit from its share buyback strategy.

Accelerating new store openings makes sense, and it should pay off over the long run. Investors may have to be patient with the stock, but AutoZone still looks like a buy.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.