It has been about a month since the last earnings report for O'Reilly Automotive (ORLY - Free Report) . Shares have added about 1.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is O'Reilly Automotive due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
O'Reilly Q4 Earnings Lag Estimates, Improves Y/Y
O’Reilly’sadjusted earnings were $3.72 per share in fourth-quarter 2018, marking 6% rise from $3.52 in the prior-year quarter. However, the figure missed the Zacks Consensus Estimate of $3.76.
During the reported quarter, net income declined 2% to $300 million (13% of sales) from $302 million (13.8% of sales) in the year-ago period.
The company’s quarterly revenues rose 6% year over year to $2.31 billion. The Zacks Consensus Estimate was pegged at $2.33 billion. O’Reilly’s comparable store sales increased 3.3%, which was at the mid-point of the projected range.
Gross profit went up 6% to $1.23 billion (or 53.3% of sales) from $1.16 billion (or 52.9% of sales) reported in the year-ago quarter. Selling, general and administrative expenses rose 7% year over year to $806 million (34.8% of sales) from $756 million (34.5% of sales) in fourth-quarter 2017. Operating income increased 6% to $428 million (or 18.5% of sales) from $403 million (or 18.4% of sales) a year ago.
In 2018, O’Reilly reported net income of $1.32 billion or $16.10 per share, up from $1.13 billion or $12.67 per share in the previous year.
Sales for the year went up 6% year over year to $9.54 billion.
O’Reilly opened 29 stores in fourth-quarter 2018. The total store count was 5,219 as of Dec 31, 2018, compared with 5,019 in the last year. The total count does not include Bennett Auto Supply, Inc. stores, which was acquired on Dec 31, 2018. Sales per weighted-average store increased to $442,000 from $434,000 in the prior-year quarter.
During the reported quarter, O’Reilly repurchased 1.4 million shares for $463 million, reflecting average price of $338.92 per share. In the last year, the company repurchased 6.1 million shares for $1.71 billion.
Subsequently, from the end of the fourth quarter till the date of the earnings release, the company purchased additional 0.7 million shares for $248 million.
O’Reilly reported cash and cash equivalents of $31.3 million at the end of the fourth quarter, down from $46.3 million at the end of the year-ago period. Its long-term debt increased to $3.4 billion as of Dec 31, 2018, from $2.9 billion as of Dec 31, 2017.
At the end of 2018, O’Reilly generated $1.7 billion in cash from operating activities compared with $1.4 billion recorded in the prior year. During the period, capital expenditure was $504.3 million compared with $466 million in the year-ago period. Further, free cash flow improved to $1.19 billion from $889.1 million witnessed in the last year.
For first-quarter 2019, O’Reilly projects earnings of $3.92-$4.02 per share. Further, the company expects 3-5% rise in consolidated comparable store sales.
For 2019, O’Reilly projects total revenues of $10-$10.3 billion and earnings of $17.37-$17.47 per share. Also, it expects to open 200-210 stores in 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, O'Reilly Automotive has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, O'Reilly Automotive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.