On Oct 22, 2013, we reaffirmed the Neutral recommendation on
O'Reilly Automotive Inc.
) based on its strong fundamentals and improved earnings
expectations, which offset the negatives.
Why the Reiteration?
O'Reilly earnings increased 37.4% 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
O'Reilly is scheduled to release its third-quarter financial
results after the closing bell on Oct 23, 2013. The Zacks
Consensus Estimate for the company's third-quarter earnings per
share stands at $1.65, up 25.33% over the prior-year quarter.
O'Reilly regularly opens new stores to boost sales. Moreover,
the company continues to benefit from its dual market strategy
and strong distribution network. The increased buyback
authorization and improved 2013 earnings guidance are added
However, on the negative side, a large part of O'Reilly's cash
is locked in inventories, while its debt position is
deteriorating. Moreover, the company's stores are concentrated in
a few locations in the U.S., which makes it sensitive to the
economic and weather conditions of those regions.
Further, O'Reilly's strategy of lowering the time-to-market
for its products to satisfy the professional installer market
puts it at a disadvantage versus competitors such as
Advance Auto Parts Inc.
). Considering these positive and negative factors, we choose to
maintain our Neutral recommendation on the stock.
Other Stocks to Consider
O'Reilly currently carries a Zacks Rank #3 (Hold).
), which has a Zacks Rank #2 (Buy), is worth considering in the
auto parts industry.
ADVANCE AUTO PT (AAP): Free Stock Analysis
AUTOZONE INC (AZO): Free Stock Analysis
CARMAX GP (CC) (KMX): Free Stock Analysis
O REILLY AUTO (ORLY): Free Stock Analysis
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