As a leader in their industry and a top Zacks Rank among
peers, O'Reilly Auto (
) is a stock that should not be ignored. The company has
beaten the Zacks Consensus Estimate five earnings reports in a
row, exceeding expectations by an average of 5%. More
than that, they are in a space with strong growth and a somewhat
defensive correlation to the broad market.
A Growing Industry
Things have come a long way since 1957 when O'Reilly was first
formed. In 1960, there were 74 million cars on the road and
180 million people in the U.S. Today, there are over 300
million people in the U.S. and close to 250 million registered
vehicles on the roads.
The DIY (do it yourself) auto repair market has grown along
with the auto, truck and motorcycle industry and so have the
local shops (maintainers) that do the work for us.
With parts and repair costs dropping and cars becoming more
complicated, the ratio of DIY to DIFM (do-it-for-me) has been
dropping as well. O'reilly is positioned to take advantage
of that trend by catering to non-agency maintenance shops in
addition to the DIYers looking to put in a new battery , perform
minor maintenance or detail their rides.
Earnings and Revenue
ORLY currently trades at roughly 21 times trailing earnings, with
a forward multiple around 18, roughly the same valuation and
growth outlook as we saw in February last year with shares $25
On February 2nd the company reported its 20th consecutive year
of comparable store sales growth, record revenue and operating
income since becoming a public company in April of 1993.
Quite a feat when you consider the two recessions they have
O'Reilly's sales for the fourth quarter ended December 31,
2012, increased $97 million, or 7%, to $1.49 billion from $1.39
billion for the same period one year ago. Gross profit for the
fourth quarter increased to $750 million (or 50.4% of sales) from
$695 million (or 49.9% of sales) for the same period one year
ago, representing an increase of 8%.
Net income for the fourth quarter ended December 31, 2012,
increased $10 million, or 8%, to $133 million (or 8.9% of sales)
from $123 million (or 8.8% of sales) for the same period one year
Diluted EPS for Q4 2012 increased 21% to $1.14 on 116 million
shares versus $0.94 for the same period one year ago on 130
Their industry is ranked 12th out of 265 and the stock is a
Zacks Rank Buy #1.
O'reilly's Future Growth
With 4,000 locations, O'reilly is second only to AutoZone (5,029)
in store count. But the industry is still fragmented and
much of it is open for O'Reilly to capture either organically or
by acquisition. In fact, the top 10 auto parts chains only
account for 45% of the total industry's $231 billion per year
With over $6 billion in sales in 2012, the company is looking
to expand their store count by 190 and capture 6.6 to 6.7 billion
in sales in 2013. Same store sales growth is expected to be
3%-5% in 2013 compared to 3.8% in 2012.
Margins have been steadily on the rise since 2008, with
adjusted operating margins coming in at 15.8% in 2012 and
15.8-16.2% margin expected for FY2013.
Even CNBC's Jim Cramer is lovin' on ORLY an gave it a "buy"
nod during his lightening round on March 12th.
Early last year I
about ORLY with the stock in the low $80 range as a good momentum
play. Shares quickly gained over 30%, peaking at over
$106. It feels like a similar setup this time around
with the stock consolidating close to its highs and poised for a
O'Reilly has formed a nice support base around the $100.50
level, below that you have some stickiness at the top of the
recent earning's gap at $99.30 and them the 50 and 200 day moving
averages below at $96.77 and $90.57 respectively.
The most recent breakout occurred on January 24th when the 50
day jumped above the 200. A solid earnings report was the
propellant soon after.
While ORLY's fundamentals are compelling and the techncials
show good support, the stock will still be subject to market
fluctuations, though it tends to be "less market sensitive" with
its low beta of 0.43. This adds a defensive element to the
shares, but keep in mind that any sharp moves in either direction
made by the broad market will most likely carry ORLY with
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O REILLY AUTO (ORLY): Free Stock Analysis
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