Why Shares of AutoZone Suddenly Plunged

AutoZone (NYSE: AZO) shares plunged on Tuesday, making it the worst-performing stock in the S&P 500 index at midday.

What's going on?

Well, the automotive replacement parts and accessories chain reported its first-quarter financial results on Tuesday morning and Wall Street was not impressed.

While revenue in the quarter rose 8.2% from a year ago, to $4.6 billion, diluted earnings per share came in at $31.04, below last year's level and, more importantly, lower than the consensus analyst estimate of $32.71.

In addition, analysts expected same-store sales -- a key metric for any retailer -- to rise 5.6% over last year, but growth was lower at 5.5%.

The company blamed its falling earnings on tariffs.

The auto parts chain continues to expand

That said, the auto parts retailer opened 53 net new stores in the quarter -- including 12 in Mexico and two in Brazil -- and said it plans to aggressively open more through the rest of the fiscal year. It currently has a total of 7,710 stores, all of them in the U.S., Mexico, and Brazil.

And the company is well positioned to benefit from a growing automotive aftermarket, which is expected to reach $576 billion this year in the U.S. and $2.3 billion globally. So investors might have overreacted on Tuesday.

Matthew Benjamin 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.