O'Reilly Automotive Inc. (ORLY - Free Report) is set to release second-quarter 2018 earnings on Jul 25, after the market closes. In the last reported quarter, the company delivered a positive surprise of 0.6%. It surpassed expectations in all the trailing four quarters, with an average beat of 3.5%.
In the past three months, shares of O'Reilly Automotive have outperformed the industry it belongs to. The stock has advanced 34.4% compared with the industry’s increase of 25% during the period.
Let’s see, how things are shaping up for this announcement.
O'Reilly Automotive, Inc. Price and EPS Surprise
Why a Likely Positive Surprise?
Our proven model shows that O'Reilly Automotive is likely to beat earnings this quarter. This is because a stock needs to have the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for increasing the odds of an earnings beat.
Earnings ESP: Earnings ESP for O'Reilly Automotive is +1.27% as the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $4.09 and $4.04, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: O'Reilly Automotive currently carries a Zacks Rank #3, which increases the predictive power of ESP. This, when combined with a positive ESP, makes us reasonably confident of an earnings beat.
Conversely, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
What’s Driving Better-Than-Expected Earnings?
For second-quarter 2018, O’Reilly Automotive projects diluted earnings per share of $3.95-$4.05 compared with $3.10 recorded in the prior-year quarter. It expects consolidated comparable store sales to be 2-4%, rising from 1.7% in second-quarter 2017. The company’s dual-market strategy to sell products for both Do-it-Yourself (DIY) customers and Do-it-for-Me (DIFM) or professional installers and expansion in large markets as well as in scarcely populated areas gives it a competitive edge over other companies in the industry.
The company also follows an aggressive share-repurchase policy. In the last reported quarter, it repurchased 2.2 million shares for $549 million, reflecting an average price of $251.08 per share. Additionally, O’Reilly raised the share repurchase authorization amount by an additional $1 billion to $10.75 billion.
For the soon-to-be-released quarter, the Zacks Consensus Estimate for sales per weighted-average store stands at $470,000, up from the actual figure of $450,000 in first-quarter 2018.
However, O’Reilly Automotive’s strategy to lower time-to-market for its products to meet the demand in professional installer marketplaces has resulted in logistical disadvantage compared with its competitors. Also, the company is experiencing continuous rise in SG&A expenses, majorly due to new store openings and maintaining the old ones, which might hurt margins.
Other Stocks to Consider
Here are a few other stocks worth considering from the same space, with the right combination of elements to outpace earnings estimates this time around:
LKQ Corporation (LKQ - Free Report) has an Earnings ESP of +2.43% and a Zacks Rank #1. Its second-quarter 2018 results are expected to be released on Jul 26.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Visteon Corporation (VC - Free Report) has an Earnings ESP of +2.86% and a Zacks Rank #2. The company’s second-quarter 2018 financial results are scheduled to be released on Jul 26.
Oshkosh Corporation (OSK - Free Report) has an Earnings ESP of +2.85% and has a Zacks Rank of 2. The company is scheduled to report third-quarter fiscal 2018 results on Jul 31.
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