O'Reilly's (ORLY) Q2 Earnings And Revenues Lag Estimates

O’Reilly Automotive Inc.’s (NASDAQ:ORLY) diluted earnings per share were $4.51 in second-quarter 2019, up 5.4% from $4.28 in the prior-year quarter. However, the figure missed the Zacks Consensus Estimate of $4.67.

During the reported quarter, net income amounted to $354 million (13.7% of sales), up from $353 million (14.4% of sales) recorded in the year-ago quarter.

The company’s quarterly revenues rose 5.2% year over year to $2.59 billion. However, the figure missed the Zacks Consensus Estimate of $2.6 billion. O’Reilly’s comparable store sales increased 3.4% in the quarter ended Jun 30, 2019 compared with 4.6% in the year- ago quarter.

Gross profit went up 6% to $1.37 billion (or 52.8% of sales) from $1.29 billion (or 52.5% of sales) reported in the year-ago quarter. Selling, general and administrative expenses rose 8% year over year to $870 million (33.6% of sales) from $809 million (33% of sales) in second-quarter 2018. Operating income increased 4% to $498 million (or 19.2% of sales) from $479 million (or 19.5% of sales) reported in the prior-year quarter.

Store Information

O’Reilly opened 43 stores across 15 states in the quarter under review. The total store count was 5,344 as of Jun 30 compared with 5,147 a year ago. Sales per weighted-average store increased to $483,000 from $476,000 in the prior-year quarter.

Share Repurchases

During the reported quarter, O’Reilly repurchased 1.6 million shares for $599 million at an average price of $366.76 per share. From the end of the quarter to the date of earnings release, the company repurchased an additional 0.2 million shares of its common stock for $63 million at an average price of $380.79 per share.

Financial Position

The company had cash and cash equivalents of $55.8 million at the end of the second quarter compared with $36.9 million in the year-ago period. Its long-term debt increased to $3.8 billion as of Jun 30 from $3.2 billion as of Jun 30, 2018.

At the end of the second quarter, O’Reilly generated $406.3 million in cash from operating activities compared with $443 million recorded a year ago. During the period, capital expenditure amounted to $142.6 million compared with $109.2 million in the year-ago period. Further, free cash flow declined to $261.4 million from $320.3 million a year ago.

Outlook

For third-quarter 2019, O’Reilly projects earnings in the range of $4.73-$4.83 per share. Further, the company expects 3-5% rise in consolidated comparable store sales.

For 2019, O’Reilly reiterated total revenues projection in the range of $10-$10.3 billion and earnings per share in the band of $17.37-$17.47.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the auto space are Copart, Inc (NASDAQ:CPRT) , CarMax, Inc (NYSE:KMX) and Advance Auto Parts, Inc (NYSE:AAP) . While Copart sports a Zacks Rank #1 (Strong Buy), CarMax and Advance Auto Parts carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Copart has an expected long-term growth rate of 20%. In the past six months, shares of the company have shot up 59.3%.

CarMax has an expected long-term growth rate of 12.6%. In the past six months, shares of the company have rallied 47.9%.

Advance Auto Parts has an expected long-term growth rate of 11.6%. In the past six months, shares of the company have improved 2.3%.

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