A Look at O’Reilly Automotive’s Profit Margins in 4Q17



O’Reilly Automotive’s 4Q17 results

Previously in this series, we looked at O’Reilly Automotive’s (ORLY) 4Q17 revenues. The company reported a moderate 4.4% increase in its revenues. However, its 4Q17 same-store sales growth rate declined compared to 4Q16. 

ORLY plans to expand this reach by targeting 200 new stores opening in fiscal 2018, which should help the company to expand its consumer base. Let’s look at O’Reilly Automotive’s profit margins in 4Q17.

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ORLY’s 4Q17 profit margins

In 4Q17, ORLY’s gross profit stood at ~$1.2 billion, about 4.0% higher than ~$1.1 billion in 4Q16. The company’s gross profit margin remained flat with a minor dip to 52.9% in 4Q17 from 53.1% in 4Q16.

O’Reilly Automotive’s operating profit stood at $403.0 million with an operating profit margin of 18.4% in 4Q17. This operating profit margin was significantly lower than 19.4% in 4Q16 and 19.7% in 3Q17.

Similarly, the company’s adjusted net profit rose 1.3% to $249.0 million in 4Q16 with a net profit margin of 11.4%. This trend reflected weakness from ORLY’s net profit margin of 11.7% in 4Q16.

What to expect in 1Q18

According to Wall Street analysts’ consensus estimates, O’Reilly’s gross profit margin could remain flat on a YoY (year-over-year) basis in the next few quarters. Analysts estimate the company’s gross profit margins to be flat YoY at 52.6% 1Q18. Likewise, these estimates suggested that its 2Q18 gross profit margins could be at flat YoY at 52.4%.

The gross profit margins of auto part retailers such as O’Reilly Automotive are much higher than major auto manufacturers (IYK) such as General Motors (GM), Ford (F), and Fiat Chrysler (FCAU). Higher fixed costs involved in the car manufacturing business are among the key reasons that hurt these automakers’ profit margins.

Read on to the next part to learn how ORLY’s valuation multiples look for 1Q18.


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