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O'Reilly (ORLY) to Post Q1 Earnings: What's in the Offing?

Zacks Equity Research
·4 mins read

O'Reilly Automotive, Inc. ORLY is slated to release first-quarter 2020 results on Apr 22, after the closing bell. The Zacks Consensus Estimate for the quarter's earnings is pegged at $3.96 per share on revenues of $2.47 billion.

This U.S.-based specialty retailer of automotive parts delivered weaker-than-expected results in the last reported quarter due to higher selling, general and administrative expenses. Over the trailing four quarters, O'Reilly missed estimates on three occasions and beat in the other — the average positive surprise being 0.6%. This is depicted in the graph below:

O'Reilly Automotive, Inc. Price and Consensus

O'Reilly Automotive, Inc. Price and Consensus
O'Reilly Automotive, Inc. Price and Consensus

O'Reilly Automotive, Inc. price-consensus-chart | O'Reilly Automotive, Inc. Quote

Which Way are the Estimates Treading?

The Zacks Consensus Estimate for first-quarter earnings per share has been revised downward by a penny in the past seven days to $3.96. The figure indicates a year-over-year decrease of 2.22%. However, the Zacks Consensus Estimate for revenues suggests a year-over-year increase of 2.26%.

Key Factors

O'Reilly is anticipated to have gained from store openings and distribution centers in profitable regions during the first quarter. Notably, the Zacks Consensus Estimate for the number of stores at the end of the March-end quarter is pegged at 5,499, indicating an increase from the 5,306 and 5,460 recorded in the year-ago period and the prior quarter, respectively.

However, rising coronavirus fears, especially in March, are likely to have thwarted vehicle demand. The stores are expected to have witnessed a drop in footfall, hurting the firm’s sales and earnings. The Zacks Consensus Estimate for first-quarter 2020 comps growth is pegged at 3%, suggesting a decline from the prior-year quarter’s 3.2%.

Elevated selling, general and administrative (SG&A) costs and high capex associated with store openings are also likely to have clipped margins.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for O’Reilly this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: O’Reilly has an Earnings ESP of -3.75%. This is because the Most Accurate Estimate of $3.81 per share comes in 15 cents lower than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: O’Reilly carries a Zacks Rank of 4 (Sell) currently.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Anthem, Inc. ANTM has an Earnings ESP of +1.28% and carries a Zacks Rank #3, currently. The company is slated to release first-quarter 2020 earnings on Apr 29.

Aflac Incorporated AFL is set to report quarterly numbers on Apr 29. The company has an Earnings ESP of +1.31% and holds a Zacks Rank of 3, at present.

Cigna Corporation CI is scheduled to release earnings figures on Apr 30. The stock has an Earnings ESP of +1.53% and currently carries a Zacks Rank #3.

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Aflac Incorporated (AFL) : Free Stock Analysis Report
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Anthem, Inc. (ANTM) : Free Stock Analysis Report
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