O'Reilly Automotive

O'Reilly Automotive (ORLY - Analyst Report) continues to rise despite lofty valuation, the stock remains a Zacks #1 Rank (Strong Buy).

Company Description

O'Reilly Automotive is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories.

Good Earnings

We have to go back to Oct 26 for the last quarterly report, but it was a good one. Net income increased 27% or $32 million ahead of the year ago level of $117 million. Revenue for the period was up 8% to $1.54 billion.

Earnings per share came in at $1.10, 10% ahead of what analysts polled by Zacks were expecting. After meeting earnings expectations in the June quarter of 2011, ORLY has returned to posting an earnings surprise.

More Shares to be Repurchased

On November 16, the company announced its intention to increase a share repurchase program. Adding $500 million to the existing program brings the total to $1.5 billion. Prior to the increase, the company had repurchased 14.4 million shares for $859 million for an average price of $59.81, well below current levels.

Valuations

Shares of ORLY are not cheap by most metrics, but underlying metrics such as sales per store and sales per square foot increased in the most recent quarter.

The stock is trading at a premium to its direct competitors with a 21.4x forward PE. By comparison, Autozone (AZO - Analyst Report), a Zacks #2 Rank (Buy) stock trades at 14x forward earnings estimates.

The Chart

ORLY has a solid history of beating estimates, a key reason for its Zacks #1 Rank (Strong Buy). A look at the price and consensus chart below shows a consistent trend of higher earnings expecations and a higher stock price.

Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

Read the full analyst report on ORLY