A month has gone by since the last earnings report for O'Reilly Automotive (ORLY - Free Report) . Shares have added about 7.9% in that time frame, outperforming 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 Q1 Earnings Top Estimates, Down Y/Y
O’Reilly reported reported earnings per share of $3.97 in first-quarter 2020, surpassing the Zacks Consensus Estimate of $3.86. However, the bottom line compared unfavorably with $4.05 a share recorded in the prior-year quarter. O’Reilly’s quarterly revenues came in at $2,476.5 million, topping the consensus mark of $2,426 million. Moreover, the top line was higher than the prior-year level of $2,410.6 million.
Net income amounted to $300.4 million in the quarter, down 6% year over year. The auto parts retailer’s comparable store sales declined 1.9% year over year in the quarter under review against a 3.2% rise in the comparable year-ago period. The metric was estimated to grow in the range of 2-4%. Coronavirus jitters and stay-at-home orders in multiple states hit the firm hard in March, in turn resulting in comps decline.
Notably, SG&A expenses increased 5% to $872 million from $835 million in first-quarter 2019. Operating income declined 5% to $424 million from $445 million reported in the prior-year quarter.
During the reported quarter, O’Reilly repurchased 1.5 million shares for $574 million at an average price of $386.71 per share. The company currently has approximately $995 million remaining under the current share repurchase authorization. However, amid COVID-19-induced financial uncertainty, it has suspended the share buyback program. Further, the firm has withdrawn its annual guidance. In a bid to conserve cash, O’Reilly is implementing several cost-containment strategies including reduction of store operating hours and postponement of discretionary capital investments. To help serve customers effectively amid the coronavirus mayhem, it is undertaking several initiatives like curbside pickup for Buy Online and Pick Up In-Store orders, et al.
The company had cash and cash equivalents of $287 million as of Mar 31, 2020. Its long-term debt stands at $4,471 billion, representing a debt-to-capital ratio of 97.6%.
During the quarter under review, O’Reilly generated $459 million in cash from operating activities compared with $440.6 million in the comparable year-ago period. Capital expenditure amounted to $133.3 million compared with $152.9 million in the year-ago period. Free cash flow totaled $227.2 million compared with $279.2 million a year ago. New stores opened during the quarter totaled 76, bringing the total store count to 5,533 as of Mar 31, 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
Currently, O'Reilly Automotive has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward 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.