O'Reilly Prices $300 Million Notes

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On August 16, O’Reilly Automotive Inc. (ORLY) announced its plan for an offering of $300 million senior subordinated notes due 2022. The company subsequently declared the pricing of $300 million of 3.800% senior subordinated notes at 99.627% of their face value.

The proceeds from the offering will be used for general corporate purposes, incorporating a hike in the working capital along with share repurchases, repayment of debt and investment in other business opportunities. The proceeds will also be used for the payment of fees and expenses related to the offering.

In September 2011, the company offered $300 million of unsecured 4.625% senior notes due 2021. The 4.625% senior notes were priced at 99.826% of their face value with maturity on September 15, 2021. The proceeds from this offering were used for the payment of fees and expenses related to the offering, while  the remaining amount was used for general corporate purposes, primarily share repurchases.

O’Reilly registered a 20% increase in its earnings per share to $1.15 in the second quarter of 2012, compared to 96 cents in the prior-year quarter. The result beat the Zacks Consensus Estimate by a penny. Net income increased 9% to $146 million from $134 million in the second quarter of 2011.Total revenues rose 6% to $1.56 billion, essentially in line with the Zacks Consensus Estimate.

O'Reilly is the third largest retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the U.S. The company sells an extensive line of products consisting of new and remanufactured automotive hard parts (such as mufflers, brakes, and shock absorbers), maintenance items, accessories, a complete range of auto body paint and related materials, automotive tools, and professional service equipment. Its main competitors include Advance Auto Parts Inc. (AAP) and AutoZone Inc. (AZO).

Currently, O'Reilly retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. We have a long-term (more than 6 months) Neutral recommendation on the stock.

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