AutoZone, Inc. (NYSE:AZO) shares were little changed Wednesday as investors digested a fresh bullish call from JP Morgan.

Analyst Christopher Horvers stuck with an Overweight rating and higher estimates, citing resilient demand and improving long-term earnings power.

Horvers reiterated the rating, with a price forecast of $4,850.

Also Read: AutoZone’s Domestic ‘Do It For Me’ Business Driving Market Share Gains

Horvers said he raised near-term estimates after stronger comparable performance, though lower gross margin tempered the lift.

The analyst noted his first-quarter domestic comp forecast now sits above broader expectations.

Demand And Comp Trends

Horvers said recent industry checks showed no structural slowdown in DIY demand, despite some early-quarter volatility.

He pointed to better weekend spending and supportive weather, which helped restore momentum, the analyst added.

Horvors said he expects DIY and DIFM comps to accelerate, driven by firmer inflation, steady demand, and share gains.

The analyst added that management previously anticipated mid-single-digit inflation near term, rising to high-single-digit by spring.

Margins, Costs, And Earnings Power

Horvers said he trimmed his gross margin view because merchandising benefits were softer and mix pressure persisted.

The analyst noted that last year’s LIFO impact created a sizable headwind that overshadowed underlying margin strength.

Management expects another large LIFO headwind early in the year, with easing pressure later.

He added that the underlying gross margin should remain flat to slightly higher, excluding LIFO.

Horvers said his SG&A outlook reflects faster store-level cost growth tied to higher comps and expansion efforts.

The analyst noted this spending aligns with management’s plan to defend market share and support new locations.

Horvers said these changes produce a modestly higher operating margin and a slightly stronger EPS forecast.

Net-net, the analyst believes the earnings revision cycle can start to turn positive from here.

He said rolling estimates forward should boost out-year earnings power as sales quicken and LIFO reverses.

AZO Price Action: AutoZone shares were up 0.86% at $3859.62 at the time of publication on Wednesday, according to Benzinga Pro data.

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