O’Reilly Automotive Stock: Performance So Far in 1Q18



O’Reilly Automotive stock

O’Reilly Automotive (ORLY) traded on a positive note in January 2018, rising 10%. However, the stock turned negative in February, mainly due to investors’ concerns about its weak 2018 outlook. The company saw a 7.7% value erosion in February. As of March 6, 2018, ORLY stock has risen 4.7% YTD (year-to-date).

In 4Q17, ORLY stock performed better than automakers Ford (F) and General Motors (GM) but worse than its direct peer AutoZone (AZO). Ford and GM rose marginally by 1.5% and 4.3%, while AutoZone rose 19.5%.

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Recent earnings update

In 4Q17, O’Reilly Automotive reported adjusted EPS (earnings per share) of $2.90. That was 12% higher than $2.59 in 4Q16. The company beat analysts’ EPS estimate of $2.80. However, its weak same-store sales growth kept investor sentiment negative after the earnings event.

Other key drivers

In the fourth quarter of 2017, O’Reilly’s revenues were $2.2 billion, a 4.4% rise from $2.1 billion in 4Q16. On the negative side, its same-store sales grew 1.3% in 4Q17 compared to 4.8% in 4Q16. Earlier this year, management guided its 4Q17 same-store sales growth at 0%–2%.

The company’s 4Q17 gross profit was $1.2 billion, which was about 4% higher than $1.1 billion in 4Q16. With that, its gross profit margin remained flat with a minor negative change to 52.9% in 4Q17 from 53.1% the previous year.

For 1Q18, management guided the company’s same-store-sales growth rate to improve to 2%–4%. The positive guidance could keep investor confidence high going forward.

In the next part, we’ll see why Advance Auto Parts stock has outperformed its peers in 2018 so far.


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