a leader in their industry and a top Zacks Rank among peers, O’Reilly
Auto (ORLY - Analyst Report)
is a stock that should
not be ignored. The company has beaten
the Zacks Consensus Estimate five earnings reports in a row, exceeding
by an average of 5%. More than that,
they are in a space with strong growth and a somewhat defensive
the broad market.
Things have come a long way since 1957 when O’Reilly
was first formed. In 1960, there were 74
million cars on the road and 180 million people in the U.S.
Today, there are over 300 million people in
the U.S. and close to 250 million registered vehicles on the roads.
The DIY (do it
yourself) auto repair market
has grown along with the auto, truck and motorcycle industry and so
local shops (maintainers) that do the work for us.
With parts and repair
costs dropping and cars
becoming more complicated, the ratio of DIY to DIFM (do-it-for-me) has
dropping as well. O’reilly is positioned
to take advantage of that trend by catering to non-agency maintenance
addition to the DIYers looking to put in a new battery , perform minor
or detail their rides.
ORLY currently trades at roughly 21
times trailing earnings, with a forward multiple around 18, roughly the
valuation and growth outlook as we saw in February last year with
On February 2nd the
reported its 20th consecutive year of comparable store sales growth,
revenue and operating income since becoming a public company in April
of 1993. Quite a feat when you consider the two
recessions they have endured.
O’Reilly’s sales for
the fourth quarter ended
December 31, 2012, increased $97 million, or 7%, to $1.49 billion from
billion for the same period one year ago. Gross profit for the fourth
increased to $750 million (or 50.4% of sales) from $695 million (or
sales) for the same period one year ago, representing an increase of 8%.
income for the fourth quarter ended December 31, 2012, increased $10
or 8%, to $133 million (or 8.9% of sales) from $123 million (or 8.8% of
for the same period one year ago.
EPS for Q4 2012 increased 21% to $1.14 on 116 million shares versus
the same period one year ago on 130 million shares.
industry is ranked 12th out of 265 and the stock is a Zacks Rank Buy #1.
With 4,000 locations, O’reilly is second only
to AutoZone (5,029) in store count. But the
industry is still fragmented and much of it is open for O’Reilly to
either organically or by acquisition. In
fact, the top 10 auto parts chains only account for 45% of the total
$231 billion per year business.
With over $6 billion
in sales in 2012, the
company is looking to expand their store count by 190 and capture 6.6
billion in sales in 2013. Same store
sales growth is expected to be 3%-5% in 2013 compared to 3.8% in 2012.
Margins have been
steadily on the rise since
2008, with adjusted operating margins coming in at 15.8% in 2012 and
margin expected for FY2013.
Even CNBC’s Jim
Cramer is lovin’ on ORLY an
gave it a “buy” nod during his lightening round on March 12th.
Early last year I wrote
about ORLY with the stock in the low $80 range as a good momentum play.
Shares quickly gained over 30%, peaking at
over $106. It feels like a similar
setup this time around with the stock consolidating close to its highs
poised for a possible breakout.
O’Reilly has formed a
nice support base
around the $100.50 level, below that you have some stickiness at the
top of the
recent earning’s gap at $99.30 and them the 50 and 200 day moving
below at $96.77 and $90.57 respectively.
most recent breakout occurred on January 24th when the 50 day jumped
above the 200. A solid earnings report
was the propellant soon after.
ORLY’s fundamentals are compelling and the techncials show good
stock will still be subject to market fluctuations, though it tends to
market sensitive” with its low beta of 0.43.
This adds a defensive element to the shares, but keep in mind that any
moves in either direction made by the broad market will most likely
A Levy is one of the most highly sought after traders in the world and
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