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O'Reilly (ORLY) to Benefit From Aggressive Store Openings

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WF vs. BEN: Which Stock Should Value Investors Buy Now?

WF vs. BEN: Which Stock Is the Better Value Option?

On Jun 15, we issued an updated research report on O’Reilly Automotive, Inc. ORLY.

This automotive aftermarket parts’ specialty retailer is set to gain from the opening of stores and the expansion of the distribution network. This will help it penetrate in existing markets, and expand in new and contiguous ones. In 2017, O’Reilly opened 198 new stores. In first-quarter 2018, the company opened 78 stores.

Also, the company pursues an aggressive share-repurchase policy, which continues to boost earnings per share. In 2017, O’Reilly invested $2.17 billion to repurchase 9.3 million shares. Further, in February 2018, the company raised the share-repurchase authorization amount by an additional $1 billion, making the total amount to $10.75 billion. In first-quarter 2018, O’Reilly repurchased 2.2 million shares for $549 million, reflecting an average price of $251.08 per share. Subsequently, at the end of the quarter, the company purchased additional 0.4 million shares for $87 million.

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%.

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.

However, the company’s presence — only in the United States, majorly in Texas and California — makes its business sensitive to the economic and weather conditions of those regions. Bad weather condition discourages customers, majorly DIY customers, from visiting the company stores.

In the past three months, shares of O’Reilly have outperformed the industry it belongs to. During the period, its stock has witnessed a rise of 13.8% in comparison with the industry’s gain of 12%.


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

A few better-ranked stocks in the auto space are Oshkosh Corporation OSK, Allison Transmission Holdings, Inc. ALSN and Ferrari N.V. RACE.  While both Oshkosh and Allison Transmission Holdings sport a Zacks Rank # 1 (Strong Buy), Ferrari carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oshkosh has an expected long-term growth rate of 18.3%. Shares of the company have risen 3.6% over the past year.

Allison Transmission Holdings has an expected long-term growth rate of 10%. Over the past year, shares of the company have gained 10.6%.

Ferrari has an expected long-term growth rate of 17.3%. Over the past year, shares of the company have gained 65.9%.

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