O'Reilly (ORLY) Q4 Earnings & Revenues Surpass Estimates

O’Reilly Automotive Inc. (NASDAQ:ORLY) reported adjusted earnings of $2.9 per share in fourth-quarter 2017, beating the Zacks Consensus Estimate of $2.78. The bottom line was $2.59 in the prior-year quarter.

Net income improved 23% to $302 million (13.8% of sales) from $246 million (11.7% of sales) in the fourth quarter of 2016.

Quarterly sales rose 4% year over year to $2.19 billion, surpassing the Zacks Consensus Estimate of $2.18 billion. Comparable store sales inched up 1.3% in the reported quarter compared with a 4.8% rise in the year-ago quarter. This downside was due to lesser demand in the market.

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

Gross profit gained 4% to $1.16 billion (52.9% of sales) from $1.11 billion (53.3% of sales) a year ago. Selling, general and administrative expenses increased 7% year over year to $756 million (34.5% of sales) from $707 million (33.7% of sales). Operating income slipped 1% to $403 million (or 18.4% of sales) from $408 million (or 19.4% of sales) a year ago.

Fiscal 2017 Results

O’Reilly reported earnings of $12.67 per share in fiscal 2017, up from $10.73 earned in fiscal 2016. The Zacks Consensus Estimate for the metric was $11.92.

Net income increased to $1.13 billion (12.6% of sales) from $1.04 billion (12.1% of sales) a year ago. Further, sales rose to $8.98 billion from $8.59 billion in fiscal 2016. Moreover, the top line topped the Zacks Consensus Estimate of $8.97 billion.

Store Information

During the fourth quarter of 2017, O’Reilly opened 36 stores across the country and closed down one. Total store count was 5,019 as of Dec 31, 2017. Sales per weighted-average store decreased to $434,000 from $437,000 in fourth-quarter 2016.

Share Repurchases

During the fourth quarter of 2017, O’Reilly repurchased 1.3 million shares for $279 million, reflecting an average price of $222.7 per share. In fiscal 2017, the company purchased 9.3 million shares in total for an investment of $2.17 billion.

Since the company’s share repurchase program inception in January 2011, O’Reilly repurchased 66.7 million shares in all for $9.16 billion, indicating an average price of $137.31 per share.

Financial Position

O’Reilly had cash and cash equivalents of $46.3 million as of Dec 31, 2017 compared with $146.6 million as of Dec 31, 2016. Long-term debt was $3 billion as of Dec 31, 2017 compared with $1.89 billion as of Dec 31, 2016.

At the end of fiscal 2017, net cash flow from operations decreased to $1.4 billion from $1.5 billion a year ago. Also in the same period, capital expenditures decreased to $465.9 million from $476.3 million. Further, at fiscal 2017-end, free cash flow to the firm was $889 million compared with $978 million from the year-ago period.

Guidance

For the first quarter of 2018, O’Reilly projects diluted earnings per share in the range of $3.55-$3.65. The company expects consolidated comparable store sales to climb 2-4%.

Also, for fiscal 2018, O’Reilly expects total revenues within the band of $9.4-$9.6 billion while earnings per share are anticipated within $15.1-$15.2. The company forecasts a consolidated comparable store sales increase of 2-4% during the year. The gross margin view lies within 52.5-53% while the operating margin outlook is estimated at 18.5-19%.

O’Reilly reiterated its capital expenditure within the range of $490-$520 million. Also, for 2018, the company predicts free cash flow between $1.1 billion and $1.2 billion.

Zacks Rank & Other Key Picks

O’Reilly carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the auto space include Peugeot SA (OTC:PUGOY) , Lear Corporation (NYSE:LEA) and Genuine Parts Company (NYSE:GPC) , each with a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peugeot has an expected long-term growth rate of 16.6%. Shares of the company have gained 4.5% in the last 30 days.

Lear Corp has an expected long-term growth rate of 7.1%. The stock has jumped 29.1% in the last six months.

Genuine Parts has an expected long-term growth rate of 7.2%. In the last six months, shares of the company have rallied 18.9%.

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