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O'Reilly's (ORLY) Q4 Earnings & Revenues Top Estimates

O'Reilly Automotive Inc.ORLY reported an 18% increase in earnings to $2.59 per share in the fourth quarter of 2016 from $2.19 in the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of $2.54. Net income improved 13% to $246 million (11.7% of sales) from $219 million (11.2% of sales) in the fourth quarter of 2015.

Quarterly revenues went up 8% to $2.10 billion from $1.95 billion a year ago. Revenues also beat the Zacks Consensus Estimate of $2.08 billion. Comparable store sales increased 4.8% in the reported quarter compared with a 7.7% rise in the prior-year quarter.

Gross profit rose 8% to $1.11 billion (53.1% of sales) from $1.03 billion (52.7% of sales) a year ago. Selling, general and administrative expenses increased 6% year over year to $707 million (33.7% of sales) from $665 million (34.1% of sales). Operating income went up 12% to $408 million (19.4% of sales) from $363 million (18.6% of sales) a year ago.

O'Reilly Automotive, Inc. Price, Consensus and EPS Surprise

O'Reilly Automotive, Inc. Price, Consensus and EPS Surprise | O'Reilly Automotive, Inc. Quote

2016 Results

Earnings for full-year 2016 increased 17% to $10.73 per share from $9.17 in 2015 and outpaced the Zacks Consensus Estimate of $10.67. Revenues for 2016 improved 8% to $8.59 billion from $7.97 billion in 2015, marginally surpassing the Zacks Consensus Estimate of $8.58 billion.

Store Information

During 2016, O'Reilly opened 212 stores across the country. The total store count was 4,829 as of Dec 31, 2016. Sales per weighted average-store increased to $437,000 from $426,000 in the fourth quarter of 2015.

Share Repurchases

During 2016, O'Reilly repurchased 5.7 million shares for $1.51 billion, reflecting an average price of $264.21. Subsequent to the end of the fourth quarter through Feb 7, it bought back 0.9 million shares for $254 million, implying an average price of $268.33.

Since the inception of the share repurchase program in Jan 2011, O'Reilly has repurchased a total of 57.9 million shares for $7.12 billion, indicating an average price of $122.91. As of Feb 7, 2017, the company had $634 million remaining under its current share repurchase authorization.

Financial Position

O'Reilly had cash and cash equivalents of $146.6 million as of Dec 31, 2016, compared with $116.3 million as of Dec 31, 2015. Long-term debt was $1.9 billion as of Dec 31, 2016, compared with $1.4 billion as of Dec 31, 2015.

In 2016, net cash flow from operations increased to $1.5 billion from $1.3 billion a year ago. Meanwhile, capital expenditures rose to $471.2 million from $411.3 million in 2015. Free cash flow in the period was $977.8 million compared with $867.5 million 2015.

Guidance

For the first quarter of 2017, O'Reilly projects earnings per share in the range of $2.78-$2.88. The company expects consolidated comparable store sales increase of 2%-4%.

For full-year 2017, the company expects earnings per share in the band of $12.05-$12.15. O'Reilly projects consolidated comparable store sales increase in the range of 3%-5% during the year. The company anticipates revenues in the band of $9.1-$9.3 billion. For 2017, the gross margin guidance is pegged at 52.8%-53.2% and operating margin is expected to be 20.1%-20.5%.

O'Reilly expects capital expenditures of $470-$500 million and free cash flow between $930 million and $980 million for the year.

Price Performance

O'Reilly has underperformed the Zacks categorized Automotive - Retail and Wholesale - Parts industry over the last three months. The company posted a 0.7% decline over this period, compared to the industry's gain of 4.8%. O'Reilly's concentrated store locations make it vulnerable to regional economic volatility and other localized problems. Moreover, much of the company's cash is locked in inventories.

Zacks Rank & Key Picks

O'Reilly currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the auto space include Penske Automotive Group, Inc. PAG , Fox Factory Holding Corp FOXF and General Motors Company GM . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected earnings growth rate of around 16.6% for the current year. Penske Automotive has an expected long-term growth rate of 8.2%, while the same for General Motors is pegged at 9.4%.

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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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