O'Reilly 2Q Earnings Surge 37% - Analyst Blog

By
A A A

O'Reilly Automotive Inc. ( ORLY ) posted a 37.4% increase in earnings to $1.58 per share in the second quarter of 2013 compared with $1.15 in the year-ago quarter. Earnings also exceeded the Zacks Consensus Estimate by 9 cents. Net income improved 21.2% to $177.1 million (10.3% of sales) from $146.1 million (9.3%) in the second quarter of 2012.

Quarterly revenues scaled up 9.7% to $1.71 billion from $1.56 billion in the same period a year ago, marginally beating the Zacks Consensus Estimate of $1.70 billion. Comparable store sales increased 6.5% compared with 2.5% in the second quarter of 2012. Comparable store sales increase surpassed the quarterly estimate of 4% to 6%.

Gross profit ascended 11.8% to $871.9 million (50.8% of sales) from $779.9 million (49.9% of sales) a year ago, due to improved acquisition costs, product mix and pricing management.

Selling, general and administrative expenses rose 7.3% to $575.6 million (33.6% of sales) from $536.3 million (34.3%) in the 2012-quarter. Operating income increased 21.6% to $296.3 million (17.3% of sales) from $243.6 million (15.6% of sales) for the same period last year. The year-over-year improvement was driven by management's focus on expense control along with better gross margin.

Store Information

During the quarter, O'Reilly opened 47 stores and closed 1 store, bringing its total store count to 4,087 in 42 states as of Jun 30, 2013. Sales per weighted average-store increased to $419,000 from $404,000 a year ago.

Share Repurchases

Recently, O'Reilly's board of directors approved an increase in share repurchase authorization by an additional $500 million. Thus, the cumulative authorization under the share repurchase program has been increased to $3.5 billion.

During the quarter, O'Reilly repurchased 2.5 million shares of its common stock for $274 million, reflecting an average price of $107.61. During the first half of 2013, the company repurchased 5.0 million shares for $502 million at an average price of $100.10. Subsequent to the end of the second quarter and through the date of the earnings release, the company has repurchased an additional 0.5 million shares for $56.0 million, implying an average price of $113.66.

Since the inception of the share repurchase program in January 2011, O'Reilly repurchased a total of 37.6 million shares for $2.98 billion, reflecting an average price of $79.27. As of Jul 24, 2013, the company had approximately $521 million worth of shares remaining under its share repurchase program.

Financial Position

O'Reilly had cash and cash equivalents of $365.9 million as of Jun 30, 2013, compared with $367.7 million as of Jun 30, 2012. Long-term debt increased to $1.4 billion as of Jun 30, 2013 from $797.4 million as of Jun 20, 2012. This translated into a higher long-term debt-to-capitalization ratio of 41.0% as of Mar 31, 2013 compared with 23.4% as of Jun 30, 2012.

In the quarter, net cash flow from operations declined 36.5% to $439.4 million from $691.5 million in the previous-year quarter. The decrease in cash flow was primarily attributable to higher accounts receivable. Meanwhile, capital expenditures (net) increased to $175.9 million from $149.3 million in the same quarter of 2012.

Guidance

O'Reilly projected earnings per share in the range of $1.60-$1.64 and consolidated comparable store sales to increase in the band of 4% to 6% for the third quarter of 2013.

For full year 2013, the company raised its earnings per share guidance to the range of $5.79 to $5.89 from the earlier range of $5.64 to $5.74. However, O'Reilly reiterated its guidance of consolidated comparable store sales increase of 3% to 5% for the year. The company also reiterated revenue guidance of $6.6 billion to $6.7 billion, upgraded gross margin guidance to 50.3% to 50.7% from 50.0% to 50.4%, and reiterated operating margin guidance between 16.0% and 16.4% for the year.

O'Reilly reinstated capital expenditures guidance of $385 million to $415 million and free cash flow guidance between $450 million and $500 million for the year.

Our Take

O'Reilly Automotive is a prominent player in the automotive replacement parts and accessories industry along with Advance Auto Parts Inc. ( AAP ), AutoZone Inc. ( AZO ) and CarMax Inc. ( KMX ). It sells its products to both Do-it-Yourself (DIY) customers and Do-it-for-Me (DIFM) or professional installers. Currently, it retains a Zacks Rank #3 (Hold).



ADVANCE AUTO PT (AAP): Free Stock Analysis Report

AUTOZONE INC (AZO): Free Stock Analysis Report

CARMAX GP (CC) (KMX): Free Stock Analysis Report

O REILLY AUTO (ORLY): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AAP , AZO , KMX , ORLY

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

100%
67%
100%
100%

Most Active by Volume

55,414,702
  • $15.38 ▼ 0.39%
38,503,210
  • $66.34 ▲ 2.26%
36,466,704
  • $8.36 ▼ 9.52%
35,253,294
  • $26.55 ▲ 1.34%
32,752,347
  • $6.55 ▲ 1.87%
31,778,001
  • $95.22 ▲ 0.19%
28,396,556
  • $51.49 ▼ 0.62%
23,800,987
  • $42.09 ▲ 0.97%
As of 7/11/2014, 04:03 PM