As I write this, shares of O’Reilly Automotive (ORLY) are up nearly 6% after the auto parts retailer reported record sales and earnings for the fourth quarter. Let’s take a closer look at O’Reilly and see whether it gets the green light from me.
For those of you who haven’t heard of it, O’Reilly Automotive is one of the largest specialty retailers for aftermarket parts, automotive tools and professional service equipment in the United States. The company has more than 4,500 stores throughout 44 states as well as a lucrative online store.
The company caters to both do-it-yourself customers and professional installers, selling everything from new and remanufactured auto parts (such as alternators, fuel pumps), maintenance items (oil, antifreeze), accessories (floor mats, seat covers) and auto body paint. O’Reilly Automotive also has a wind product offering. And the company specializes in locating hard to find parts, making them a go-to choice for car enthusiasts.
Last quarter, business was brisk. Comparable store sales (which only counts stores open a year or longer) climbed 7.7%; 2015 marked the 23rd consecutive year of comparable store sales growth. Meanwhile, total sales jumped 10% to $1.95 billion. Analysts were looking for $1.91 billion in sales, so O’Reilly posted a modest sales surprise. Over the same period, earnings jumped 20% to $129 million, or $2.19 per share. This beat the $2.08 consensus EPS estimate by 5.3%.
So it’s easy to see why ORLY shares are sharply higher after hours. However, I see plenty of upside potential from here. Looking ahead to FY 2016, O’Reilly expects to see comparable store sales climb between 3% and 5%. Meanwhile, the analyst community is calling for 7.2% annual sales growth and 14.2% earnings growth for the current fiscal year.
The company also authorized a $750 million increase to its already generous share repurchase program. O’Reilly’s total stock buybacks weigh in at $6.25 billion.
O’Reilly’s performance today proves that amidst general uncertainty, fundamental strength is king. Keeping this in mind, I consider ORLY an A-rated Strong Buy.
P.S. If you’d like more information on ORLY, including my current price limit for the stock, you can access it through a risk-free trial of Blue Chip Growth.