O'Reilly Automotive (ORLY) Up 9.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for O'Reilly Automotive (ORLY). Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is O'Reilly Automotive due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
O'Reilly's Q4 Earnings Beat on Stellar Comps Growth
O’Reilly reported fourth-quarter 2020 diluted earnings per share of $5.40, surpassing the Zacks Consensus Estimate of $5.12.
Remarkable comparable store sales growth drove this outperformance. Comps grew 11.2% year on year, outpacing the Zacks Consensus Estimate of 8.38%. The bottom line also increased from the $4.25 a share recorded in the prior-year quarter, marking an increase of 27% year on year.
This U.S.-based specialty retailer of automotive parts registered quarterly revenues of $2,828.8 million, which topped the consensus mark of $2,760 million. Moreover, the top line comes in higher than the prior-year level of $2,482.9 million.
Comps growth of 11.2%, year on year, for the quarter compares favorably with the prior-year period’s 4.4%.
In addition, the company opened six new stores (five domestic and one in Mexico) during the fourth quarter, bringing the total store count to 5,616 as on Dec 31, 2020, marginally beating the Zacks Consensus Estimate of 5,615.
Financials, Share Repurchase & Costs
Notably, during the December-end quarter, selling, general and administrative expenses flared up 6% year on year to $938 million. Nonetheless, operating income shot up 21% to $534 million from the $536.4 million reported in the prior-year period on high sales. Net income amounted to $393 million, up 21% year over year.
The board of directors authorized additional $1 billion stock buyback, raising the aggregate authorization under the program to $15.75 billion. Also, during the reported quarter, O’Reilly repurchased 2.2 million shares for $ 993 million at an average price of $451.9 per share. As of Feb 10, the company has $1.18 billion remaining under the current share-repurchase authorization.
The company had cash and cash equivalents of $465.6 million as of Dec 31, 2020. Its long-term debt stands at $4,123.2 million, up from the year-ago level of $3,890.5 million.
During the reported quarter, O’Reilly generated $487.5 million in cash from operating activities compared with the year-ago period’s $218.8 million. Capital expenditure amounted to $102.2 million compared with the year-earlier period’s $146.9 million. Free cash flow jumped to $314.4 million from the prior year’s $43.2 million, up a whopping 627.3% year on year.
2021 Outlook
For 2021, O’Reilly projects total revenues of $11.5-$11.8 billion and earnings per share of $22.7-$22.9. Furthermore, the company expects comparable store sales to decline up to 2% in 2021. Also, the company envisions free cash flow in the band of $1-$1.3 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.04% due to these changes.
VGM Scores
At this time, O'Reilly Automotive has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, O'Reilly Automotive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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