On Dec 23, 2013, we reiterated our Neutral recommendation on
O'Reilly Automotive Inc.
Why the Reiteration?
O'Reilly posted a 28% increase in earnings to $1.69 per share
in the third quarter of 2013 compared with $1.32 in the year-ago
quarter. Earnings also exceeded the Zacks Consensus Estimate by 4
cents. Net income improved 17% to $186.5 million (10.8% of sales)
from $159.3 million (9.9%) in the third quarter of 2012.
For full-year 2013, the company raised its earnings per share
guidance to the range of $5.91 to $5.95 from the earlier range of
$5.79 to $5.89. O'Reilly expects consolidated comparable store
sales to increase between 3.5% and 4.5% during the year.
O'Reilly aggressively pursues the opening of new stores for
greater penetration in existing markets and to expand into new,
contiguous markets. During the first nine months of 2013,
O'Reilly opened 163 stores and closed 4 stores.
Moreover, O'Reilly pursues an aggressive share repurchase
policy, which continues to boost earnings per share. During the
first nine months of 2013, the company repurchased 6.5 million
shares for $687 million.
However, much of O'Reilly's cash is locked in inventories
while its debt position has deteriorated. Moreover, the company's
stores are concentrated in a few locations in the U.S. Therefore,
its business is sensitive to the economic and weather conditions
of those regions.
Further, the analysts covering O'Reilly did not revise their
estimates in the last 30 days. Based on these positive and
negative factors, we maintain a Neutral recommendation on the
O'Reilly is a prominent player in the automotive replacement
parts and accessories industry along with
Advance Auto Parts Inc.
). The company currently carries a Zacks Rank #3 (Hold).
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