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O'Reilly (ORLY) Q3 Earnings Drive Past Estimates, Up Y/Y

Zacks Equity Research
Comparable store sales drive O'Reilly's (ORLY) third-quarter earnings past estimates. Further, it raises earnings per share outlook for 2018.

O’Reilly Automotive Inc.’s ORLY adjusted earnings per share were $4.50 in third-quarter 2018, marking a 40% surge from $3.22 in the prior-year quarter. The figure also beat the Zacks Consensus Estimate of $4.30.

During the reported quarter, net income improved 29% to $366 million (14.7% of sales) from $284 million (12.1% of sales) recorded in the year-ago period.

The company’s quarterly revenues rose 6% year over year to $2.5 billion. The figure is almost in line with the Zacks Consensus Estimate. O’Reilly’s comparable store sales increased 3.9%, which is within 2-4% anticipated earlier.

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 7% to $1.32 billion (or 53% of sales) from $1.23 billion (or 52.6% of sales) reported in the year-earlier quarter. Selling, general and administrative expenses rose 8% year over year to $831 million (33.5% of sales) from $768 million (32.8% of sales) in third-quarter 2017. Operating income increased 5% to $485 million (or 19.5% of sales) from $462 million (or 19.7% of sales) reported a year ago.

Store Information

During the third quarter, O’Reilly opened 43 stores and closed two. Total store count was 5,190 as of Sep 30, 2018. Sales per weighted-average store increased to $477,000 from $469,000 in third-quarter 2017.

Share Repurchases

During the reported quarter, O’Reilly repurchased 0.9 million shares for $416 million, reflecting an average price of $306.22 per share. Subsequently, from the end of third quarter to the date of earnings release, the company purchased additional 0.2 million shares for $68 million.

Since the inception of the company’s share repurchase program in January 2011, O’Reilly has repurchased 71.1 million shares for $10.35 billion, indicating an average price of $145.53 per share.

Financial Position

O’Reilly reported cash and cash equivalents of $40 million at the end of the third quarter, up from $37.3 million at the end of the year-ago period. Its long-term debt increased to $3.2 billion as of Sep 30, 2018, compared with $2.9 billion as of Sep 30, 2017.

At the end of nine months on Sep 30, 2018, O’Reilly generated $1.3 billion in cash from operating activities compared with $1.2 billion recorded in the prior-year period. During the period, capital expenditure was $350.5 million from $347.8 million in the year-ago period. At the end of the nine-month period of 2018, its free cash flow also improved to $958.6 million from $704.4 million witnessed in the comparable period of last year.

Outlook

For fourth-quarter 2018, O’Reilly projects earnings per share of $3.6-$3.7. Further, the company expects consolidated comparable store sales to rise 2-4%.

For 2018, O’Reilly raised its earnings per share outlook to $15.95-$16.05 from $15.7-$15.8. However, it reiterated total revenue guidance of $9.4-$9.6 billion for the year. The company expects consolidated comparable store sales growth of 3-4% and gross margin of 52.5-53%.

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

Zacks Rank and Other Stocks to Consider

O’Reilly currently sports a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the auto space are CarMax, Inc. KMX, Allison Transmission Holdings, Inc. ALSN and Advance Auto Parts, Inc. AAP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CarMax has an expected long-term growth rate of 3.3%. Over the past six months, shares of the company have moved up 9.7%.

Allison Transmission has an expected long-term growth rate of 10%. Over the past three months, shares of the company have moved up 4.7%.

Advance Auto has an expected long-term growth rate of 12.3%. Shares of the company have risen 12.3% over the past three months.

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