O'Reilly Automotive Inc. ( ORLY )
earned $1.15 per share in the second quarter of 2012, a robust 20%
increase from 96 cents in the prior-year quarter and ahead of the
Zacks Consensus Estimate by a penny. Net income increased 9% to
$146 million (9.3% of sales) from $134 million (9.0%) in the second
quarter of 2011.
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Sales for the quarter rose 6% to $1.56 billion from $1.48 billion
a year ago, almost in line with the Zacks Consensus Estimate of
$1.57 billion. Comparable store sales (change in sales for stores
open at least one year) scaled up 2.5% compared with 4.4% in the
second quarter of 2011.
Gross profit for the quarter increased 9% to $780 million (49.9%)
from $719 million (48.6%) a year ago. Selling, general and
administrative expenses escalated 8% to $536 million (34.3%) from
$496 million (33.5%) in the second quarter of prior year. Operating
income improved 10% to $244 million (15.6%) from $222 million
(15.0%) a year ago.
During the quarter, O'Reilly opened 50 stores, relocated 17 and
renovated 34 in order to improve its image in the retail market and
ensure the best customer experience. As of June 30, 2012, the
company has operated 3,859 stores. It is on track to open a total
of 180 stores in 2012.
During the quarter, O'Reilly repurchased 4.5 million shares of its
common stock at an average price of $97.47, which implies a total
investment of $440 million. During the first half of the year, the
company has repurchased 6.3 million shares at an average price of
$94.52, reflecting a total investment of $594 million. Subsequent
to the end of the second quarter until July 25, 2012, the company
has repurchased an additional 3.1 million shares at an average
price of $85.48, implying a total investment of $267 million.
Since the inception of the share repurchase program in January
2011 until July 25, 2012, the company has repurchased 25.3 million
shares at an average price of $72.67, reflecting a total investment
of $1.84 billion.
As announced on June 1, 2012, the company's Board of Directors has
increased the authorization under the repurchase program by an
additional $500 million, raising the cumulative authorization to $2
billion. As of July 25, 2012, the company had approximately $163
million remaining under its share repurchase program.
O'Reilly had cash and cash equivalents of $367.7 million as of
June 30, 2012, up from $268.8 million as of June 30, 2011.
Inventories of $2.2 billion formed a significant 78% of current
assets as of June 30, 2012.
Long-term debt was $797.4 million as of June 30, 2012 compared
with $498.6 million as of June 30, 2011. This translated into a
higher long-term debt-to-capitalization ratio of 23% compared with
14% as of June 30, 2011.
In the first half of the year, net cash flow from operations
improved to $691.5 million from $561.5 million in the prior-year
period. This was primarily attributed to improved profits and
favorable changes in operating assets and liabilities.
Capital expenditures (net) were almost flat at $149.3 million
compared with $150.0 million in the first half of 2011. As a
result, free cash flow improved to $540.1 million during the period
from $410.8 million a year ago.
For the third quarter of the year, O'Reilly has projected earnings
per share of $1.25 to $1.29 and consolidated comparable store sales
to increase in the range of 1% to 3%.
For full year 2012, the company anticipates earnings per share in
the range of $4.56 to $4.66 and consolidated comparable store sales
to increase by 3% to 5%. This compared with the previous guidance
of $4.47-$4.57 and 3% to 6%.
The company reiterated its revenue guidance of $6.15 billion-$6.25
billion, gross margin guidance of 49.4%-49.8% and operating margin
guidance of 15.4%-15.9% for the year.
It has also reiterated its capital expenditures guidance of $315
million to $345 million but raised free cash flow guidance to $725
million to $775 million from $700 million to $750 million for the
O'Reilly Automotive is the third largest specialty retailer of
automotive aftermarket parts, tools, supplies, equipment, and
accessories in the U.S., selling products to both Do-it-Yourself
(DIY) customers and Do-it-for-Me (DIFM) or professional
The company sells an extensive line of products consisting of new
and remanufactured automotive hard parts (such as mufflers, brakes,
and shock absorbers), maintenance items, accessories, a complete
range of auto body paint and related materials, automotive tools,
and professional service equipment. Its main competitors include
Advance Auto Parts Inc. ( AAP ),
AutoZone Inc. ( AZO )
and Pep Boys - Manny, Moe & Jack ( PBY
The company currently retains a Zacks #3 Rank on its shares, which
translates to a short-term rating of Hold, and we have a long-term
recommendation of Neutral on its shares.