O'Reilly Auto Makes the Best of It

O'Reilly Automotive Inc.'s (ORLY - Analyst Report) diluted earnings for second quarter were $0.48 per common share versus $0.45 per common share a year ago. Same store sales were up 3.4%. The company estimates earnings per share are expected to range from $1.57 to $1.61.

The company's recent acquisition of CSK Auto Corp. (CAO) for $1 billion is expected to boost 2009 earnings and would result in about $100 million in annual cost savings from 2010. However, rising competition, high gas prices, slowdown in miles driven as well as overall economic slowdown force us to rate the stock a Hold with a target of $29.

O'Reilly Auto has an excellent growth strategy with an exposure to both do-it-yourself (DIY) and do-it-for-me (DIFM) segments of aftermarket industry. The company is continuously benefiting from its dual-market strategy, strong distribution network as well as unparalleled access to auto parts.

The company is planning to open 205 stores in 2008 in order to achieve greater penetration in existing markets and to expand into new and contiguous markets. A heavy mix of commercial sales provides ORLY with greater exposure to less discretionary sales of hard parts and allows the company to operate in smaller markets that would otherwise not be economically viable with retail presence alone.

Read the full analyst report on ORLY