A month has gone by since the last earnings report for O'Reilly Automotive (ORLY). Shares have lost about 3.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is O'Reilly Automotive due for a breakout? 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 drivers.
O'Reilly Q2 Earnings & Sales Top Estimates
O’Reilly reported second-quarter 2020 earnings per share of $7.10, which surpassed the Zacks Consensus Estimate of $4.10. Remarkable comparable store sales growth led to the outperformance. Precisely, comps grew 16.2% against the Zacks Consensus Estimate of a decline of 12%.
The bottom line also increased from $4.51 a share recorded in the prior-year quarter. O’Reilly’s quarterly revenues came in at $3,091.6 million, which topped the consensus mark of $2,502 million. Moreover, the top line was higher than the prior-year level of $2,589.8 million.
After witnessing coronavirus-led challenges in the first two weeks of the quarter ended Jun 30, O’Reilly witnessed a robust increase in sales volume for the rest of the quarter. Comps growth of 16.2% for the quarter under review compared much favorably with the prior-year period’s increase of 3.4% on the back of robust sales in May and June.
Notably, SG&A expenses increased to $900.7 million from $870.2 million in second-quarter 2019. Nonetheless, operating income rose to $736.5 million from $498.1 million reported in the prior-year quarter on the back of high sales. Net income amounted to $531.6 million, up 50% year over year.
While the company tapped brakes on the share repurchase program on Mar 16, it resumed the buyback program on May 29 in view of an improving business scenario.
During the reported quarter, O’Reilly repurchased 0.2 million shares for $77 million at an average price of $417.79 per share. The company currently has approximately $882 million remaining under the current share repurchase authorization. However, amid COVID-19-induced uncertainty, it has refrained from providing its annual guidance.
The company had cash and cash equivalents of $872.4 million as of Jun 30, 2020. Its long-term debt stands at $4,127.4 million, increasing from the year-ago level of $3,783.7 million.
During the quarter under review, O’Reilly generated $1,099.9 million in cash from operating activities compared with $406.4 million in the year-ago period. Capital expenditure amounted to $111.2 million compared with $142.7 million in the year-ago period. Free cash flow jumped to $985.7 million from $259.7 million a year ago. New stores opened during the quarter totaled 50, bringing the total store count to 5,583 as of Jun 30, 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 25.25% due to these changes.
At this time, O'Reilly Automotive has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise O'Reilly Automotive has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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