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O'Reilly (ORLY) Beats on Q1 Earnings, Meets Sales, Lifts View

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O’Reilly Automotive Inc.’s ORLY earnings per share in first-quarter 2018 jumped around 28% year over year to $3.61. The figure also beat the Zacks Consensus Estimate of $3.59. Notably, the company's shares inched up around 1.4% to close at $227.67 yesterday after the announcement.

Net income improved 15% to $305 million (13.4% of sales) in first-quarter 2018 from $265 million (12.3% of sales) recorded in the year-ago period.

The company’s quarterly sales rose 6% year over year to $2.28 billion, mainly driven by 3.4% growth in store sales. In the year-ago quarter, store sales had recorded an increase of just 0.8%. The revenue figure in the first quarter came in line with the Zacks Consensus Estimate.

O'Reilly Automotive, Inc. Price, Consensus and EPS Surprise


O'Reilly Automotive, Inc. Price, Consensus and EPS Surprise | O'Reilly Automotive, Inc. Quote

Gross profit went up 6% to $1.20 billion (52.6% of sales) from $1.13 billion (52.5% of sales) reported in the year-earlier quarter. Selling, general and administrative expenses were up 7% year over year to $778 million (34.1% of sales) from $728 million (33.8% of sales). Operating income increased 5% to $423 million (or 18.5% of sales) from $403 million (or 18.7% of sales) reported a year ago.

Store Information

During the first quarter, O’Reilly opened 78 stores. Total store count was 5,097 as of Mar 31, 2018. Sales per weighted-average store increased to $447,000 from $440,000 in first-quarter 2017.

Share Repurchases

During the reported quarter, O’Reilly repurchased 2.2 million shares for $549 million, reflecting an average price of $251.08 per share. Subsequent to the end of the quarter, the company purchased additional 0.4 million shares, for an investment of $87 million.

Since the company’s share-repurchase program inception in January 2011, O’Reilly has repurchased 68.8 million shares, for $9.67 billion, indicating an average price of $140.55 per share.

Financial Position

O’Reilly reported cash and cash equivalents of $38.5 million at the end of the first quarter, up from $27.5 million at the end of the year-ago quarter. Its long-term debt increased to $3.19 billion as of Mar 31, 2018, compared to $1.98 billion as of Mar 31, 2017.

The company generated $432.3 million in cash from operating activities during the quarter compared with $376.7 million recorded in the prior-year period. Capital expenditures increased to $114.8 million in the reported quarter from $110.6 million in the year-ago quarter. At the end of the first quarter, its free cash flow also improved to $311.1 million from $242.8 million witnessed in the year-ago period.


For second-quarter 2018, O’Reilly projects diluted earnings per share of $3.95-$4.05. The company expects consolidated comparable store sales to climb 2-4% in the second quarter.

For full-year 2018, O’Reilly raised its earnings per share outlook to $15.3-$15.4 from $15.1-$15.2. The company, however, reiterated total revenue guidance at $9.4-$9.6 billion for the year. It also reaffirmed the consolidated comparable store-sales growth of 2-4% and gross margin view of 52.5-53% for 2018. It also confirmed the operating margin outlook of 18.5-19%.

Further, O’Reilly maintained its capital expenditure range of $490-$520 million. Also, for 2018, the company kept its free cash flow view unchanged between $1.1 billion and $1.2 billion.

Share Price Performance

Over the past six months, O’Reilly has outperformed the industry with respect to price performance. The stock has gained around 5%, while the industry recorded merely 0.4% growth during the same time frame.


Zacks Rank & Key Picks

O’Reilly currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same industry include Gentex Corporation GNTX, Honda Motor Co., Ltd. HMC and Yamaha Motor Co., Ltd. YAMHF. While Gentex sports a Zacks Rank #1 (Strong Buy), Honda Motor and Yamaha Motor carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Gentex has a long-term earnings growth rate of 9.7%. Its shares have surged 21%, over the past six months.

Honda Motor has a long-term earnings growth rate of 4.8%. The company’s shares have been up 12% during the same time frame.

Yamaha Motor has a long-term earnings growth rate of 10.1%. The stock has gained 11% in six months’ time.

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