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
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.
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.
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.
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.
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.
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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