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Why Is O'Reilly Automotive (ORLY) Down 0.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for O'Reilly Automotive (ORLY - Free Report) . Shares have lost about 0.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is O'Reilly Automotive due for a breakout? 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's Q3 Earnings Top,  Up Y/Y

O’Reilly Automotive Inc. reported diluted earnings per share of $5.08 in third-quarter 2019, up 13% from $4.50 in the prior-year quarter. Moreover, the figure surpassed the Zacks Consensus Estimate of $4.78.

The company’s quarterly revenues rose 7% year over year to $2.67 billion. Moreover, the figure beat the Zacks Consensus Estimate of $2.63 billion. O’Reilly witnessed comparable store sales growth of 5% in the quarter ended Sep 30, 2019, compared with 3.9% rise in the year-ago quarter.

Net income amounted to $391 million for the quarter, up from $366 million recorded in the year-ago quarter.

Q3 Highlights

Gross profit grew 8% to $1.42 billion from $1.32 billion in the year-ago quarter. Selling, general and administrative expenses rose 7% year over year to $886 million from $831 million in third-quarter 2018. Operating income grew 11% to $536 million from $485 million reported in the prior-year quarter.

Share Repurchases

During the reported quarter, O’Reilly repurchased 1 million shares for $387 million at an average price of $377.85 per share. From the end of the quarter to the date of the earnings release, the company repurchased an additional 0.1 million shares of its common stock for $32 million at an average price of $393.33 per share.

Financial Position

The company had cash and cash equivalents of $42.8 million at the end of the third quarter compared with $40 million in the year-ago period. Its long-term debt increased to $3.7 billion as of Sep 30, 2019, from $3.1 billion as of Sep 30, 2018.

At the end of the third quarter, O’Reilly generated $642.7 million in cash from operating activities compared with $466.8 million recorded a year ago. During the period, capital expenditure amounted to $185.6 million compared with $126.3 million in the year-ago period. Further, free cash flow rose to $454.7 million from $327 million a year ago.

Outlook

For fourth-quarter 2019, O’Reilly projects earnings of $4.12-$4.22 per share. Further, the company expects 3-5% rise in consolidated comparable store sales.

For 2019, O’Reilly reiterated total revenue projection at $10-$10.3 billion and earnings per share at $17.75-$17.85.

For the year, the company expects free cash flow of $1.0-$1.1 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, O'Reilly Automotive has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise O'Reilly Automotive has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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