What's In The Cards For O'Reilly (ORLY) In Q3 Earnings?

O'Reilly Automotive Inc. (NASDAQ:ORLY) is set to release third-quarter 2017 earnings after the market closes on Oct 25. The company delivered a positive earnings surprise in two of the trailing four quarters, with a negative average surprise of 0.38%.

Let’s see how things have shaped up for the forthcoming announcement.

Factors Influencing This Quarter

O’Reilly expects earnings per share in the range of $3.10-$3.20 for third-quarter 2017. The company anticipates consolidated comparable store sales to increase 1-3% in the reported quarter.

The company expects earnings per share in the band of $11.77-$11.87 for the full year 2017, down from the previous expectation of $12.05-$12.15. Consolidated comparable store sales are expected to increase in the range of 1-2% during the year.

Revenues are expected to be in the band of $8.9-$9.1 billion as compared with the previous expectation of $9.1-$9.3 billion. For 2017, the gross margin guidance is anticipated in the range of 52.5-52.9% and operating margin is expected to be 19.1-19.5% compared with the previous estimate of 20.1-20.5%.

Being concentrated in a few regions in the United States, O’Reilly’s business is linked to the changes in the economic and weather conditions of these regions thus impacting its sales to a considerable extent.

High inventory in current assets is likely to affect the short-term liquidity of the company in periods of low sales. Adding to its woes, O’Reilly has witnessed a rise in SG&A expenses in the first six months of 2017 to $1.47 billion. The company expects this rise to persist given the continued pressure from increasing wage rates, higher expected medical cost, additional investments in the company’s internal information system capabilities as well as costs to convert the bond stores acquired in December 2016.

Nevertheless, O’Reilly’s is aggressively undertaking acquisitions in existing markets and new, contiguous markets, which are expected to boost sales. Also, the company is opening new stores for greater penetration. Along with this, the company pursues an aggressive share repurchase policy, which continues to boost earnings per share.

O'Reilly Automotive, Inc. Price and EPS Surprise

Stocks to Consider

Here are a few stocks in the auto industry you can consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Autoliv, Inc. (NYSE:ALV) has an earnings ESP of +0.51% and carries a Zacks Rank #2. The company is expected to report third-quarter 2017 financial results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Horizon Global Corporation (NYSE:HZN) has an earnings ESP of +5.82% and carries a Zacks Rank #3. The company’s third-quarter 2017 financial results are expected to release on Oct 31.

Magna International Inc. (NYSE:MGA) has an earnings ESP of +1.91% and carries a Zacks Rank #2. The company’s third-quarter 2017 financial results are expected to release on Nov 9.

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