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O'Reilly's (ORLY) to Report Q4 Earnings: What's in Store?

O'Reilly Automotive Inc.ORLY is set to release its fourth-quarter and full-year 2016 earnings after the markets close on Feb 7. The company posted positive earnings surprise in two of the four trailing quarters, with a positive average surprise of 2.10%.

Let's see how things have shaped up for the forthcoming announcement.

Factors Influencing this Quarter

O'Reilly aggressively pursues the opening of new stores for greater penetration in existing and expansion into new, contiguous markets. During the first nine months of 2016, O'Reilly opened 141 net new stores, in both new and existing markets across the country. A higher number of stores are likely to aid the company's fourth-quarter revenues.

O'Reilly pursues an aggressive share repurchase policy, which continues to boost earnings per share. During the first nine months of 2016, the company repurchased 3.7 million shares for $960 million. From Sep 30 through Oct 26, it bought back 0.3 million shares for $71 million.

However, O'Reilly's stores are concentrated in 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.

For fourth-quarter 2016, O'Reilly projects earnings per share in the range of $2.44-$2.54, higher than $2.19 earned in the fourth-quarter 2015. The company expects consolidated comparable store sales to increase 3-5% in the quarter.

For 2016, the company expects earnings per share in the range of $10.58-$10.68, higher than $9.17 recorded in 2015. O'Reilly projects consolidated comparable store sales to grow 4-5% during the year. It anticipates revenues in the band of $8.5-$8.6 billion, higher than $7.97 billion earned in 2015. Increasing miles driven will likely boost demand for replacement parts.

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 -1.18% because the Most Accurate estimate of $2.51 stands below the Zacks Consensus Estimate of $2.54. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: O'Reilly carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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

O'Reilly Automotive, Inc. Price and EPS Surprise

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

Price Performance

O'Reilly has underperformed the Zacks categorized Automotive - Retail and Wholesale - Parts industry over the last three months. The company has posted a marginal gain of 0.03% over this period, compared to the industry's gain of 6.76%. The company's earnings estimates have been declining lately, while it has a mixed record of earnings surprises over the recent quarters.

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:

Cummins Inc. CMI , slated to report fourth-quarter and full-year 2016 results on Feb 9, has an Earnings ESP of +0.99% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

Magna International Inc. MGA has an Earnings ESP of +0.74% and a Zacks Rank #3. The company's fourth-quarter and full-year 2016 financial results are expected to release on Feb 24.

American Axle & Manufacturing Holdings, Inc. AXL has an Earnings ESP of +4.41% and a Zacks Rank #3. The company is expected to report fourth-quarter and full-year 2016 financial numbers on Feb 10.

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O'Reilly Automotive, Inc. (ORLY): Free Stock Analysis Report

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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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