O'Reilly (ORLY) to Enter Canada With Groupe Del Vasto Buyout
O'Reilly Automotive, Inc. ORLY, a leading player in the automotive aftermarket industry, is set to foray into the Canadian market with the buyout of Groupe Del Vasto, a prominent family-owned auto parts supplier based in Montreal, Quebec. This acquisition, expected to close in January 2024, subject to regulatory approvals, will further solidify ORLY’s North American presence.
Groupe Del Vasto, operating under the name Vast-Auto Distribution, brings more than 35 years of market experience in the Canadian automotive aftermarket to the table. The acquisition includes all outstanding shares of Groupe Del Vasto and its affiliated entities. Vast-Auto's network comprises two distribution centers, six satellite warehouses, 23 company-owned stores, and numerous independent partners, significantly expanding O'Reilly's service reach.
O'Reilly's decision to acquire Groupe Del Vasto is not just a geographical expansion but a strategic alignment with market trends and customer demands. The company's consistent performance, marked by 30 years of record revenues, showcases its robust business model. O'Reilly's dual-market strategy, serving both DIY and DIFM customers, and its strong distribution network give it a competitive edge in the ever-evolving automotive aftermarket.
The acquisition of Vast-Auto complements O'Reilly's growth trajectory. The integration of Vast-Auto's established Canadian network with O'Reilly's expansive product portfolio and market strategies is expected to bolster the company's sales and earnings.
O'Reilly's expansion strategy doesn't stop at geographical growth. The company has been increasing its store count, even in less populated areas, with a target of opening 180-190 new stores in 2023. Its robust e-commerce initiatives, including curbside pickup for online orders, further enhance its market position.
The company's strong cash flow generation, surpassing industry averages, supports an aggressive share buyback program, reinforcing investor confidence. In the third quarter of 2023 alone, O'Reilly repurchased 0.9 million shares for $800 million, with a substantial amount remaining under its current repurchase authorization.
O'Reilly forecasts total revenues between $15.7-$15.8 billion in 2023, a notable increase from 2022's $14.41 billion. The anticipated EPS range of $37.80 to $38.30, up from the previous estimate, reflects the company's strong financial health and growth potential.
The automotive industry's increasing complexity, with a shift toward technologically advanced auto parts, plays into O'Reilly's strengths. Its wide-ranging product offerings are well-suited to meet evolving market demand, ensuring sustained relevance and growth.
ORLY currently carries a Zacks Rank #3 (Hold).
A few better-ranked players in the auto space include Toyota TM and Stellantis STLA, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TM’s fiscal 2024 sales and EPS implies year-over-year growth of 11% and 45.4%, respectively. The earnings estimate for fiscal 2024 and 2025 has been revised upward by $2.55 and 50 cents, respectively, in the past 60 days.
The Zacks Consensus Estimate for STLA’s 2023 sales and EPS implies year-over-year growth of 12.3% and 10.5%, respectively. The earnings estimate for 2023 and 2024 has been revised upward by 29 cents and 42 cents, respectively, in the past 60 days.
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