O'Reilly (ORLY) Q4 Earnings Lag Estimates, Improves Y/Y

O’Reilly Automotive Inc.’s (NASDAQ:ORLY) adjusted earnings per share were $3.72 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 1% to $300 million (13% of sales) from $302 million (13.8% of sales) recorded 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 its projected range.

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

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) reported a year ago.

2018 Results

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.

Store Information

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.

Share Repurchases

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 to the date of the earnings release, the company purchased additional 0.7 million shares for $248 million.

Financial Position

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.

Outlook

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 per share of $17.37-$17.47. Also, it expects to open 200-210 stores in 2019.

Zacks Rank & Stocks to Consider

O’Reilly currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are General Motors Company (NYSE:GM) , Cooper Tire & Rubber Company (NYSE:CTB) , and Genuine Parts Company (NYSE:GPC) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Motors has an expected long-term growth rate of 8.5%. Share price of the company has increased 6.2% in the past six months.

Cooper Tire has an expected long-term growth rate of 4%. Over the past six months, shares of the company have gained 12.7%.

Genuine Parts has an expected long-term growth rate of 5%. Shares of the company have gained 3.2% in the past six months.

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