Critical Contrast: AutoZone (NYSE:AZO) versus Lowe’s Companies (NYSE:LOW)

Lowe’s Companies (NYSE:LOW) and AutoZone (NYSE:AZO) are both large-cap consumer discretionary companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, profitability, analyst recommendations, dividends, institutional ownership, valuation and risk.

Analyst Recommendations

This is a breakdown of recent recommendations for Lowe’s Companies and AutoZone, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lowe’s Companies	2	12	22	0	2.56
AutoZone	0	6	20	1	2.81

Lowe’s Companies presently has a consensus price target of $255.97, suggesting a potential upside of 35.76%. AutoZone has a consensus price target of $3,717.12, suggesting a potential upside of 29.59%. Given Lowe’s Companies’ higher possible upside, equities analysts clearly believe Lowe’s Companies is more favorable than AutoZone.

Profitability

This table compares Lowe’s Companies and AutoZone’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lowe’s Companies	7.34%	-75.67%	12.82%
AutoZone	12.65%	-90.08%	12.45%

Institutional & Insider Ownership

74.1% of Lowe’s Companies shares are owned by institutional investors. Comparatively, 92.7% of AutoZone shares are owned by institutional investors. 0.3% of Lowe’s Companies shares are owned by company insiders. Comparatively, 2.6% of AutoZone shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Lowe’s Companies has a beta of 0.85, suggesting that its stock price is 15% less volatile than the S&P 500. Comparatively, AutoZone has a beta of 0.34, suggesting that its stock price is 66% less volatile than the S&P 500.

Earnings and Valuation

This table compares Lowe’s Companies and AutoZone”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lowe’s Companies	$90.43 billion	1.17	$6.65 billion	$11.83	15.94
AutoZone	$20.34 billion	2.30	$2.50 billion	$152.79	18.77

Lowe’s Companies has higher revenue and earnings than AutoZone. Lowe’s Companies is trading at a lower price-to-earnings ratio than AutoZone, indicating that it is currently the more affordable of the two stocks.

Summary

AutoZone beats Lowe’s Companies on 8 of the 15 factors compared between the two stocks.

About Lowe’s Companies

Lowe’s Companies, Inc., together with its subsidiaries, operates as a home improvement retailer in the United States. The company offers a line of products for construction, maintenance, repair, remodeling, and decorating. It also provides home improvement products, such as appliances, seasonal and outdoor living, lawn and garden, lumber, kitchens and bath, tools, paint, millwork, hardware, flooring, rough plumbing, building materials, décor, and electrical. In addition, the company offers installation services through independent contractors in various product categories; and extended protection plans and repair services. It sells its national brand-name merchandise and private brand products to professional customers, homeowners, renters, businesses, and government. The company also sells its products through Lowes.com website; and through mobile applications. Lowe’s Companies, Inc. was founded in 1921 and is based in Mooresville, North Carolina.

About AutoZone

AutoZone, Inc. retails and distributes automotive replacement parts and accessories in the United States, Mexico, and Brazil. The company provides various products for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. It also offers A/C compressors, batteries and accessories, bearings, belts and hoses, calipers, chassis, clutches, CV axles, engines, fuel pumps, fuses, ignition and lighting products, mufflers, radiators, starters and alternators, thermostats, and water pumps, as well as tire repairs. In addition, the company provides maintenance products, such as antifreeze and windshield washer fluids; brake drums, rotors, shoes, and pads; brake and power steering fluids, and oil and fuel additives; oil and transmission fluids; oil, cabin, air, fuel, and transmission filters; oxygen sensors; paints and accessories; refrigerants and accessories; shock absorbers and struts; spark plugs and wires; and windshield wipers. Further, it offers air fresheners, cell phone accessories, drinks and snacks, floor mats and seat covers, interior and exterior accessories, mirrors, performance products, protectants and cleaners, sealants and adhesives, steering wheel covers, tools, vehicle entertainment systems, and wash and wax products, as well as towing services. Additionally, the company provides a sales program that offers commercial credit and delivery of parts and other products; sells automotive diagnostic and repair software under the ALLDATA brand through alldata.com and alldatadiy.com; and automotive hard parts, maintenance items, accessories, and non-automotive products through autozone.com. AutoZone, Inc. was founded in 1979 and is headquartered in Memphis, Tennessee.