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O'Reilly (ORLY) Misses Q4 Earnings Estimates, Boosts Buyback

Zacks Equity Research

O’Reilly Automotive Inc. ORLY reported earnings per share of $4.25 in fourth-quarter 2019, lagging the Zacks Consensus Estimate by a penny. High selling, general and administrative expenses led to the underperformance.

Nonetheless, the bottom line was up 14.2% from $3.72 in the prior-year quarter. Net income amounted to $324.9 million in the quarter, up from $300.3 million recorded in the year-ago period. Higher year-over-year revenues and solid comps growth resulted in the improved results.

O’Reilly’s quarterly revenues came in at $2,482.9 million, topping the consensus mark of $2,473 million. Moreover, the top line was higher than the prior-year level of $2,314.9 million. The auto-parts retailer’s comparable store sales growth was 4.4% in the quarter ended Dec 31, 2019 compared with 3.3% rise in the comparable year-ago period.

O'Reilly Automotive, Inc. Price, Consensus and EPS Surprise

O'Reilly Automotive, Inc. Price, Consensus and EPS Surprise

O'Reilly Automotive, Inc. price-consensus-eps-surprise-chart | O'Reilly Automotive, Inc. Quote

Key Takeaways

Gross profit grew 7% to $1.32 billion from $1.23 billion in the year-ago quarter. SG&A expenses increased 10% to $883 million from $806 million in fourth-quarter 2018. Operating income grew 3% to $442 million from $428 million reported in the prior-year quarter.

During the reported quarter, O’Reilly repurchased 0.3 million shares for $125 million at an average price of $427.33 per share. From the quarter-end to the date of the earnings release, the company repurchased an additional 0.2 million shares of its common stock for $88 million at an average price of $428.29 per share.Bringing in pleasant news for its shareholders, it approved additional buyback worth $1 billion, raising the aggregate authorization to $13.75 billion.

The company had cash and cash equivalents of $40.4 million as of Dec 31, 2019. Its long-term debt increased to $3.9 billion as of Dec 31, 2019 from $3.41 billion in the corresponding period of 2018. Debt-to-capital ratio stands at 90.7%.

At the end of the fourth quarter, O’Reilly generated $218.8 million in cash from operating activities compared with $385.5 million in the comparable year-ago period. During the quarter, capital expenditure amounted to $146.8 million compared with $153.8 million in the year-ago period. Free cash flow totaled $43.2 million compared with $230 million a year ago. Store count as of Dec 31, 2019 was 5,460.

Looking Forward

For first-quarter 2020, O’Reilly projects earnings within $4.37-$4.47 per share. Further, the company expects 2-4% rise in consolidated comparable store sales.

For full-year 2020, O’Reilly expects revenue between $10.7 billion and $11 billion. EPS is forecast within $19.03-$19.13. Capital expenditure is anticipated in the band of $625-$675 million. For the year, the company estimates free cash flow in the range of $1.1-$1.2 billion.

Zacks Rank & Stocks to Consider

Currently, O’Reilly carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Auto-Tires-Trucks sector include Gentherm Inc. THRM, Gentex Corporation GNTX and SPX Corporation SPXC, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gentherm has a projected earnings growth rate of 20.6% for the current year. Its shares have gained 17.8% over the past year.

Gentex Corp has an estimated earnings growth rate of 7.3% for 2020. The company’s shares have appreciated 54.6% in a year’s time.

SPX has an expected earnings growth rate of 8.1% for the current year. The stock has rallied 71.7% in the past year.

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