AutoZone (AZO) is well-positioned for growth despite industry headwinds, UBS Securities said in a note Wednesday, citing accelerating commercial sales and improving margins.

The company's Q2 results showed commercial sales growth accelerating to 7.3% from 3.2% in Q1 and Gross margin rose 36 basis points to 53.9%, excluding the impact of inventory accounting adjustments, supporting UBS's bullish outlook for the stock.

"Overall, we believe [AutoZone] continues to make progress with its key growth initiatives that will translate to sustainable share gains in the quarters ahead and power top-line growth even if industry growth slows," UBS said, adding that these gains should drive steady earnings before interest and taxes growth, share buybacks, and ultimately earnings per share expansion.

AutoZone's investments in distribution expansion-including new stores, hubs, and mega hubs-are expected to improve parts availability and drive further commercial sales gains, UBS noted. The company also stands to benefit from Advance Auto Parts' (AAP) ongoing store closures, which could further support market share expansion.

The firm also highlighted that a fiscal calendar shift created a temporary headwind in Fiscal Q1 and Q2 but is expected to turn positive in H2, providing an additional sales tailwind. Looking ahead, the firm forecasts about 4% domestic comparable sales growth in Fiscal 2026, driven by high-single-digit commercial sales growth and low-single-digit retail growth.

UBS has a buy rating on AutoZone and raised its price target to $4,025 from $3,875.

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