Why Is O'Reilly Automotive (ORLY) Up 7.6% Since Last Earnings Report?

A month has gone by since the last earnings report for O'Reilly Automotive (ORLY). Shares have added about 7.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is O'Reilly Automotive due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

O'Reilly Q3 Earnings & Sales Beat Estimates

O’Reilly reported third-quarter 2023 adjusted earnings per share of $10.72, beating the Zacks Consensus Estimate of $10.36. The bottom line increased from $9.17 in the prior-year quarter. The automotive parts retailer registered quarterly revenues of $4,203.4 million, crossing the Zacks Consensus Estimate of $4,070 million. The top line increased 10.6% year over year.

During the quarter, comps grew 8.7%. The company opened 40 new stores in the United States and Mexico. The total store count was 6,111 as of Sep 30, 2023.

Financials, Share Repurchase & Costs

In the reported quarter, selling, general and administrative expenses flared up 11.7% year over year to $1,263.2 million. Operating income rose to $897.2 million from $804.2 million generated in the year-ago period. Net income was roughly $650 million, up from $585.4 million in the year-ago quarter.

During the reported quarter, O’Reilly repurchased 0.9 million shares for $800 million at an average price of $938.11 per share. After the end of the quarter until the release date, ORLY repurchased an additional 0.5 million shares of common stock for a total investment of $420 million at an average price of $910.21 per share. As of Oct 25, the company had nearly $712 million remaining under the current share repurchase authorization.

It had cash and cash equivalents of $82.6 million at the end of the reported quarter, down from $108.6 million recorded as of 2022-end. Its long-term debt was $5,102.3 million, higher than $4,371.6 million as of Dec 31, 2022.

During the reported quarter, O’Reilly generated $866.3 million in cash from operating activities, down from the year-ago period’s $961 million. Capital expenditures totaled $293 million, rising from $159.9 million in the year-ago period. Free cash flow came in at $564.4 million, indicating a decline of 28.6% year over year.

2023 Outlook Lifted

For 2023, O’Reilly now envisions total revenues in the range of $15.7-$15.8 billion, up from the prior guidance of $15.4-$15.7 billion. Earnings per share are now expected between $37.80 and $38.30, up from the previous estimate of $37.05-$37.55. The forecast for comparable store sales growth has been revised to 7-8% from the previously guided range of 5-7%. The free cash flow guidance remains unchanged in the $1.9-$2.2 billion band. Capital expenditures are expected within the $900-$950 million range, up from the previously guided range of $750-$800 million. The company intends to open 180-190 stores this year.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, O'Reilly Automotive has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, O'Reilly Automotive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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