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O'Reilly Automotive (ORLY) Inks Deal to Buy Mayasa Auto Parts

Zacks Equity Research

O'Reilly Automotive, Inc. ORLY has agreed to acquire Mexican auto parts supplier, Mayoreo de Autopartes y Aceites, S.A. de C.V. (Mayasa). The leading specialty retailer of automotive aftermarket industry has entered into a stock purchase agreement with the shareholders of Mayasa, headquartered in Guadalajara, Mexico.

Per the agreement, O’Reilly Automotive will acquire the outstanding shares of Mayasa and affiliated entities. The deal is expected to be completed in the fourth quarter of 2019, subject to customary closing conditions and regulatory approvals. The acquisition marks O’Reilly’s first expansion outside of the United States.

Mayasa has been successful in building its business by concentrating on the fundamental value of excellent customer service and hard work. The company is currently operating five distribution centers, 20 company-owned stores as well as serving more than 2,000 independent jobber locations in 28 Mexican states.

O’Reilly Automotive sells products to Do-it-Yourself (DIY) customers and Do-it-for-Me (DIFM) or professional installers. The company has a long track record of following a dual-market strategy by serving DIY as well as DIFM customers.

The company is poised to benefit from the opening or acquiring of new stores. This enables it to penetrate existing markets and expand in new, contiguous markets. During second-quarter 2019, it opened 43 stores across 15 states. As of Jun 30, the total store count was 5,344 compared with 5,147 a year ago.  For 2019, the company aims to open 200-210 stores compared with the actual count of 206 in 2018. Additionally, it purchased a location in the north of Mississippi for distribution centre program and has three distribution centers underway. Addition of stores and distribution centers will enable O’Reilly Automotive to offer products to a large customer base.

In the past six months, O’Reilly Automotive has underperformed the industry it belongs to. During the same time frame, the company’s shares have declined 0.2% against the industry’s 8.4% growth.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the auto space are Fox Factory Holding Corp FOXF, BRP Inc DOOO and Douglas Dynamics, Inc PLOW, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has reported a positive average earnings surprise of 7.57% for the trailing four quarters. In the past three months, shares of the company have rallied 12%.

BRP has reported a positive average earnings surprise of 6.71%. In the past three months, shares of the company have returned 7.6%.

Douglas has reported a positive average earnings surprise of 32.45%. In the past three months, shares of the company have moved up 9.8%.

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