AutoZone (AZO) Financials

AutoZone Financial Summary and Trends:

AutoZone (NYSE: AZO) has demonstrated steady revenue growth and profitability over the past four years, highlighted by consistent operating cash flow and net income gains. Here is a detailed review of key financial metrics and trends observed from the latest quarterly data combined with historical results:

• Revenue Growth: Quarterly revenues have generally increased year-over-year, e.g., Q2 2025 revenue was $3.95B, reflecting a 2.4% growth relative to prior periods. On an annual basis, the company sustained mid-single-digit revenue growth in most quarters.
• Gross Margin Stability: Gross margins remain robust around 52-54%, indicating effective cost control over the revenue base.
• Strong Profit Margins: Operating margins consistently near 18-21% and net profit margins over 12%, highlighting efficient operations and pricing power.
• Operating Cash Flow Improvement: Operating cash flow increased significantly, for example, $584M in Q2 2025 and nearly $812M in Q1 2025, demonstrating strong cash-generating capability from core operations.
• CapEx Investment: Capital expenditures have steadily increased to sustain and grow operations, supporting long-term asset base alongside depreciation around $140M quarterly.
• Return on Invested Capital (ROIC): The company maintains a high ROIC around 40%, signaling strong returns on capital invested in the business.
• Leverage and Debt Levels: AutoZone carries significant long-term debt (around $9-12B) with net debt to EBITDA ratios around 2.7-3.0. While manageable, leverage remains on the higher side, which investors should watch closely.
• Equity Deficit: Stockholder’s equity is negative, mainly due to accumulated treasury shares and share repurchases, reflecting aggressive capital return strategies rather than underlying shareholder value destruction.
• Declining Quarterly Earnings Growth: QoQ earnings and net income growth metrics have been negative recently (Q2 2025 EPS declined slightly by about 2%), suggesting some near-term headwinds.
• Free Cash Flow Variability: Free Cash Flow to the Firm (FCFF) turned negative in Q2 2025 (-$333M), impacted by higher capital investments and working capital changes, which could pressure liquidity if sustained.

Additional Insights:

• Diluted earnings per share remain strong at $28.29 in Q2 2025 despite share repurchases reducing shares outstanding, supporting shareholder returns.
• The company's cash conversion cycle remains negative (around -39 days), indicating efficient working capital management.
• Effective tax rate has varied, standing near 18-22%, which impacts net profitability margins.
• Depreciation and amortization steadily track investment in PPE, highlighting proactive asset management to support growth.
• Price-to-earnings ratio sits around 22x, which is on the higher end, denoting elevated market expectations.

Summary: AutoZone shows strong operational performance with good revenue and margin expansion, solid cash flow generation, and disciplined capital deployment. However, investors should be aware of elevated leverage levels, recent softness in earnings growth, and negative free cash flow quarter-to-quarter which may reflect investments and temporary pressures. Overall, the company remains well-positioned in its sector, but vigilance on capital structure and profit growth sustainability is advised.