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O'Reilly (ORLY) to Report Q3 Earnings: What's in the Cards?

O'Reilly Automotive Inc.ORLY is set to release its third-quarter 2016 results on Oct 26, after the closing bell. Last quarter, the company posted a negative earnings surprise of 0.75%. It has delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 5.23%.

Let's see how things are shaping up prior to this announcement.

Factors Influencing this Quarter

For third-quarter 2016, O'Reilly projects earnings per share in the range of $2.77-$2.87, which at the midpoint would represent a 7% increase over EPS of $2.64 in third-quarter 2015. The company expects consolidated comparable store sales to increase 3-5%. Further, O'Reilly pursues an aggressive share repurchase policy, which continues to boost earnings per share.

Moreover, the company undertakes the opening of new stores for greater penetration in existing markets and to expand into new, contiguous markets. A higher number of stores are likely to aid the company's third-quarter revenues. In first-half 2016, the company opened 89 net, new stores across 28 states and is on track to hit its target of 210 net, new stores by the end of 2016.

However, O'Reilly's stores are concentrated in a few locations in the U.S. Therefore, its business is exposed to the economic and weather conditions of these regions. Additionally, much of O'Reilly's cash is locked in inventories, which can affect its short-term liquidity in periods of low sales.

O REILLY AUTO Price and EPS Surprise

O REILLY AUTO Price and EPS Surprise | O REILLY AUTO Quote

Earnings Whispers

Our proven model does not conclusively show that O'Reilly is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. O'Reilly's Earnings ESP is -0.34% because the Most Accurate estimate stands at $2.91, while the Zacks Consensus Estimate is pegged higher at $2.92. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: O'Reilly carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company's ESP of -0.34% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Autoliv, Inc. ALV is expected to release third-quarter 2016 results on Oct 27. The company has an Earnings ESP of +2.17% and carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

American Axle & Manufacturing Holdings Inc. AXL has an Earnings ESP of +6.35% and a Zacks Rank #3. The company's third-quarter 2016 financial results are expected to release on Nov 4.

Fox Factory Holding Corp FOXF has an Earnings ESP of +2.56% and a Zacks Rank #1. The company will report third-quarter 2016 financial numbers on Nov 2.

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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 Nasdaq, Inc.


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

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