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O’Reilly Automotive Inc. (ORLY - Free Report) reported a 10% increase in earnings to $2.90 per share in the third quarter of 2016 from $2.64 in the year-ago quarter, ahead of its previously provided guidance. However, earnings narrowly missed the Zacks Consensus Estimate of $2.92. Net income improved 4.5% to $278 million (12.5% of sales) from $266 million (12.8% of sales) in the third quarter of 2015.
Quarterly revenues went up 7% to $2.22 billion from $2.08 billion a year ago. Revenues were almost in line with the Zacks Consensus Estimate. Comparable store sales increased 4.2% in the reported quarter compared with a 7.9% rise in the prior-year quarter.
Gross profit improved 7% to $1.17 billion (52.7% of sales) from $1.09 billion (52.4% of sales) a year ago. Selling, general and administrative expenses increased 7% year over year to $722 million (32.5% of sales) from $674 million (32.4% of sales). Operating income went up 8% to $448 million (20.2% of sales) from $415 million (20% of sales) a year ago. The operating margin of 20.2% set a third-quarter record.
During the third quarter of 2016, O’Reilly opened 52 new stores across the country. This brought the number of total net, new stores opened in the first nine months of 2016 to 141 across 35 states. The total store count across 45 states, including a new state it entered in the third quarter, was 4,712 as of Sep 30, 2016. Sales per weighted average-store increased to $471,000 from $460,000 in the third quarter of 2015.
Share Repurchases
In the third quarter of 2016, O’Reilly repurchased 0.4 million shares worth $103 million, at an average price of $281.04 per share. During the first nine months of 2016, the company repurchased 3.7 million shares for $960 million, reflecting an average price of $261.32. From Sep 30, 2016 through Oct 26, it bought back 0.3 million shares for $71 million, implying an average price of $276.58.
Since the inception of the share repurchase program in Jan 2011, O’Reilly has repurchased a total of 55.2 million shares for $6.39 billion, indicating an average price of $115.76. As of Oct 26, 2016, the company had $613 million remaining under its current share repurchase authorization.
Financial Position
O’Reilly had cash and cash equivalents of $560.3 million as of Sep 30, 2016, compared with $276.9 million as of Sep 30, 2015. Long-term debt was $1.9 billion as of Sep 30, 2016, compared with $1.4 billion as of Sep 30, 2015.
In the first nine months of 2016, net cash flow from operations increased to $1.2 billion from $1.1 billion in the prior-year period. Meanwhile, capital expenditures rose to $352.7 million from $291.2 million in the first nine months of 2015. Free cash flow was $811.8 million compared with $766.2 million in the first nine months of 2015.
Business Update
In the third quarter of 2016, O’Reilly entered into a definitive agreement with Bond Auto Parts, a privately held supplier of automotive parts, to purchase substantially all of its assets. Bond Auto Parts operates 48 stores in Vermont, New Hampshire, Massachusetts and New York. The company’s focus on customer service is expected to be a perfect fit for O’Reilly.
Guidance
For fourth-quarter 2016, O’Reilly projects earnings per share in the range of $2.44–$2.54. The company expects consolidated comparable store sales to increase 3%–5%.
For full-year 2016, the company expects earnings per share in the range of $10.58–$10.68, compared to the prior guidance of $10.30–$10.70. O’Reilly projects consolidated comparable store sales to increase in the range of 4%–5% during the year, increasing the lower end of the previous estimate of 3%−5%. The company anticipates revenues in the band of $8.5–$8.6 billion, the lower end of which has been raised from the previous projection of $8.4–$8.6 billion. For 2016, the gross margin guidance is pegged at 52.4%–52.6%, compared with 52.3%–52.7% expected earlier, and operating margin is expected to be 19.5%–19.9%.
O’Reilly expects capital expenditures of $460–$490 million, and free cash flow between $850 million and $900 million for the year, up from the previous projection of $800–$850 million.
The Goodyear Tire & Rubber Company has seen its earnings estimates move north over the last 60 days.
Tata Motors Limited has a long-term expected growth rate of 3.60%.
Standard Motor Products Inc. has a long-term expected growth rate of 15%.
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O'Reilly (ORLY) Misses Q3 Earnings, Announces Acquisition
O’Reilly Automotive Inc. (ORLY - Free Report) reported a 10% increase in earnings to $2.90 per share in the third quarter of 2016 from $2.64 in the year-ago quarter, ahead of its previously provided guidance. However, earnings narrowly missed the Zacks Consensus Estimate of $2.92. Net income improved 4.5% to $278 million (12.5% of sales) from $266 million (12.8% of sales) in the third quarter of 2015.
Quarterly revenues went up 7% to $2.22 billion from $2.08 billion a year ago. Revenues were almost in line with the Zacks Consensus Estimate. Comparable store sales increased 4.2% in the reported quarter compared with a 7.9% rise in the prior-year quarter.
Gross profit improved 7% to $1.17 billion (52.7% of sales) from $1.09 billion (52.4% of sales) a year ago. Selling, general and administrative expenses increased 7% year over year to $722 million (32.5% of sales) from $674 million (32.4% of sales). Operating income went up 8% to $448 million (20.2% of sales) from $415 million (20% of sales) a year ago. The operating margin of 20.2% set a third-quarter record.
Store Information
During the third quarter of 2016, O’Reilly opened 52 new stores across the country. This brought the number of total net, new stores opened in the first nine months of 2016 to 141 across 35 states. The total store count across 45 states, including a new state it entered in the third quarter, was 4,712 as of Sep 30, 2016. Sales per weighted average-store increased to $471,000 from $460,000 in the third quarter of 2015.
Share Repurchases
In the third quarter of 2016, O’Reilly repurchased 0.4 million shares worth $103 million, at an average price of $281.04 per share. During the first nine months of 2016, the company repurchased 3.7 million shares for $960 million, reflecting an average price of $261.32. From Sep 30, 2016 through Oct 26, it bought back 0.3 million shares for $71 million, implying an average price of $276.58.
Since the inception of the share repurchase program in Jan 2011, O’Reilly has repurchased a total of 55.2 million shares for $6.39 billion, indicating an average price of $115.76. As of Oct 26, 2016, the company had $613 million remaining under its current share repurchase authorization.
Financial Position
O’Reilly had cash and cash equivalents of $560.3 million as of Sep 30, 2016, compared with $276.9 million as of Sep 30, 2015. Long-term debt was $1.9 billion as of Sep 30, 2016, compared with $1.4 billion as of Sep 30, 2015.
In the first nine months of 2016, net cash flow from operations increased to $1.2 billion from $1.1 billion in the prior-year period. Meanwhile, capital expenditures rose to $352.7 million from $291.2 million in the first nine months of 2015. Free cash flow was $811.8 million compared with $766.2 million in the first nine months of 2015.
Business Update
In the third quarter of 2016, O’Reilly entered into a definitive agreement with Bond Auto Parts, a privately held supplier of automotive parts, to purchase substantially all of its assets. Bond Auto Parts operates 48 stores in Vermont, New Hampshire, Massachusetts and New York. The company’s focus on customer service is expected to be a perfect fit for O’Reilly.
Guidance
For fourth-quarter 2016, O’Reilly projects earnings per share in the range of $2.44–$2.54. The company expects consolidated comparable store sales to increase 3%–5%.
For full-year 2016, the company expects earnings per share in the range of $10.58–$10.68, compared to the prior guidance of $10.30–$10.70. O’Reilly projects consolidated comparable store sales to increase in the range of 4%–5% during the year, increasing the lower end of the previous estimate of 3%−5%. The company anticipates revenues in the band of $8.5–$8.6 billion, the lower end of which has been raised from the previous projection of $8.4–$8.6 billion. For 2016, the gross margin guidance is pegged at 52.4%–52.6%, compared with 52.3%–52.7% expected earlier, and operating margin is expected to be 19.5%–19.9%.
O’Reilly expects capital expenditures of $460–$490 million, and free cash flow between $850 million and $900 million for the year, up from the previous projection of $800–$850 million.
O REILLY AUTO Price, Consensus and EPS Surprise
O REILLY AUTO Price, Consensus and EPS Surprise | O REILLY AUTO Quote
Zacks Rank
O'Reilly is a prominent player in the automotive replacement parts and accessories industry. The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the auto space include The Goodyear Tire & Rubber Company (GT - Free Report) , Tata Motors Limited and Standard Motor Products Inc. (SMP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Goodyear Tire & Rubber Company has seen its earnings estimates move north over the last 60 days.
Tata Motors Limited has a long-term expected growth rate of 3.60%.
Standard Motor Products Inc. has a long-term expected growth rate of 15%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>