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What's in the Cards for O'Reilly (ORLY) in Q3 Earnings?

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O'Reilly Automotive Inc. (ORLY - Free Report) is set to release third-quarter 2017 earnings after the market closes on Oct 25. The company delivered a positive earnings surprise in two of the trailing four quarters, with a negative average surprise of 0.38%.

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

Factors Influencing This Quarter

O’Reilly expects earnings per share in the range of $3.10-$3.20 for third-quarter 2017. The company anticipates consolidated comparable store sales to increase 1-3% in the reported quarter.

The company expects earnings per share in the band of $11.77-$11.87 for the full year 2017, down from the previous expectation of $12.05-$12.15. Consolidated comparable store sales are expected to increase in the range of 1-2% during the year.

Revenues are expected to be in the band of $8.9-$9.1 billion as compared with the previous expectation of $9.1-$9.3 billion. For 2017, the gross margin guidance is anticipated in the range of 52.5-52.9% and operating margin is expected to be 19.1-19.5% compared with the previous estimate of 20.1-20.5%.

Being concentrated in a few regions in the United States, O’Reilly’s business is linked to the changes in the economic and weather conditions of these regions thus impacting its sales to a considerable extent.

High inventory in current assets is likely to affect the short-term liquidity of the company in periods of low sales. Adding to its woes, O’Reilly has witnessed a rise in SG&A expenses in the first six months of 2017 to $1.47 billion. The company expects this rise to persist given the continued pressure from increasing wage rates, higher expected medical cost, additional investments in the company’s internal information system capabilities as well as costs to convert the bond stores acquired in December 2016.

Nevertheless, O’Reilly’s is aggressively undertaking acquisitions in existing markets and new, contiguous markets, which are expected to boost sales. Also, the company is opening new stores for greater penetration. Along with this, the company pursues an aggressive share repurchase policy, which continues to boost earnings per share.

O'Reilly Automotive, Inc. Price and EPS Surprise

 

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

Earnings Whispers

Our proven model does not conclusively show that O’Reilly is likely to beat the Zacks Consensus Estimate 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: Earnings ESP for O’Reilly is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $3.14 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: O’Reilly currently carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, a 0.00% ESP makes surprise prediction difficult.

Price Performance

O’Reilly has lost 26.3% over a year underperforming the 17.3% decline of the industry it belongs to.

 


Stocks to Consider

Here are a few stocks in the auto industry you can consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Autoliv, Inc. (ALV - Free Report) has an earnings ESP of +0.51% and carries a Zacks Rank #2. The company is expected to report third-quarter 2017 financial results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Horizon Global Corporation has an earnings ESP of +5.82% and carries a Zacks Rank #3. The company’s third-quarter 2017 financial results are expected to release on Oct 31.

Magna International Inc. (MGA - Free Report) has an earnings ESP of +1.91% and carries a Zacks Rank #2. The company’s third-quarter 2017 financial results are expected to release on Nov 9.

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