O'Reilly Automotive Tops Q2 Earnings on Operational Merit - Analyst Blog

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O'Reilly Automotive Inc. ( ORLY ) posted a 20.9% increase in earnings to $1.91 per share in the second quarter of 2014 from $1.58 in the year-ago quarter. Earnings also exceeded the Zacks Consensus Estimate by 6 cents. Net income improved 16.1% to $205.6 million (11.1% of sales) from $177.1 million (10.3% of sales) in the second quarter of 2013.

O'reilly Automotive, Inc - Earnings Surprise | FindTheBest



Quarterly revenues scaled up 7.7% to $1.85 billion from $1.71 billion in the same period a year ago. Revenues marginally surpassed the Zacks Consensus Estimate of $1.83 billion. Comparable store sales increased 5.1% in the reported quarter compared with a 6.5% increase in the second quarter of 2013.

Gross profit ascended 9.1% to $950.9 million (51.5% of sales) from $871.9 million (50.8% of sales) a year ago. Selling, general and administrative expenses rose 6.7% to $614.4 million (33.3% of sales) from $575.6 million (33.6% of sales) in the year-ago quarter. Operating income increased 13.6% to $336.5 million (18.2% of sales) from $296.3 million (17.3% of sales) in the same period last year.

Store Information

During the first half of 2014, O'Reilly opened 91 net new stores in 28 states. The company plans to open a total of 200 stores in 2014. The total store count across 42 states stood at 4,257 as of Jun 30, 2014. Sales per weighted average-store increased to $433,000 from $419,000 a year ago.

New Distribution Centers

The distribution center, located in Naperville, IL, will be operational in the third quarter of 2014 itself. The Devens, MA, distribution center will be inaugurated by the end of the year. O'Reilly believes that these distribution centers will enhance the network and performance of the company.

Share Repurchases

During the quarter under review, O'Reilly repurchased 1.9 million shares of its common stock for $278 million, reflecting an average price of $148.21. During the first half of 2014, the company repurchased 2 million shares of its common stock for $300 million, translating into an average price of $148.21. Subsequent to the end of the second quarter and through Jul 23, 2014, the company repurchased an additional 0.6 million shares for $89 million, implying an average price of $152.03.

Since the inception of the share repurchase program in Jan 2011, O'Reilly has repurchased a total of 43.2 million shares for $3.74 billion, indicating an average price of $86.62. As of Jul 23, 2014, the company had approximately $257 million worth of shares remaining under its share repurchase program.

Financial Position

O'Reilly had cash and cash equivalents of $453.4 million as of Jun 30, 2014, compared with $365.9 million as of Jun 30, 2013. Long-term debt was $1.4 billion as of Jun 30, 2014 at par with the long-term debt as of Jun 30, 2013.

In the first half of 2014, net cash flow from operations increased to $655.5 million from $439.4 million in the previous-year period. Meanwhile, capital expenditures (net) increased to $194.1 million from $175.9 million in the same period of 2013.

Guidance

For third-quarter 2014, O'Reilly projects earnings per share in the range of $1.91-$1.95. The company expects consolidated comparable store sales to increase by 3% to 5%.

For full-year 2014, the company expects earnings per share in the range of $7.00 to $7.10, higher than the previous guidance of $6.82 to $6.92. Meanwhile, O'Reilly expects consolidated comparable store sales to increase 3.5% to 5.5%, up from the previous estimate of 3% and 5%. The company also reiterated revenue guidance at $7 billion to $7.2 billion for 2014 and gross margin guidance of 50.9%-51.4%, and raised the operating margin guidance to 17.1% to 17.5% from the earlier guidance of 17% to 17.4%.

O'Reilly expects capital expenditures in the range of $390 million to $420 million. Free cash flow is expected between $625 million to $675 million, up from $580 million to $620 million guided previously 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 ), Pep Boys - Manny, Moe & Jack ( PBY ) and CarMax Inc. ( KMX ). All these stocks along with O'Reilly retain a Zacks Rank #2 (Buy).


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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: ORLY , AAP , KMX , PBY

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