On Thursday, DA Davidson maintained a Buy rating on O'Reilly (NASDAQ:ORLY) Automotive (NASDAQ: ORLY), with a steady price target of $1,275.00. The firm acknowledged the company's lower-than-expected comparable store sales (comp) of 1.5%, which fell short of the revised estimate of 2.0% set earlier in the week and below the consensus.
O'Reilly Automotive has also revised its full-year sales forecast to the lower end of its previous range and slightly decreased its operating profit and earnings per share (EPS) guidance.
The adjustment follows a pattern of the company not meeting expectations for the third consecutive quarter this year. Despite these shortfalls in the first and second quarters, O'Reilly Automotive's shares have shown resilience, increasing by 26% year to date, which surpasses the market's 22% gain.
Within DA Davidson's 14-name Retailing/Broadlines & Hardlines coverage group, only Walmart (NYSE:WMT), Dick's Sporting Goods (NYSE:DKS), Costco (NASDAQ:COST), Tractor Supply Company (NASDAQ:TSCO), and BJ's Wholesale Club (NYSE:BJ) have performed better.
The firm believes that O'Reilly Automotive is perceived by the market as a top-tier retailer experiencing temporary challenges rather than a company with fundamental long-term issues. DA Davidson's classification of O'Reilly Automotive as a "Best-of-Breed Bison" reflects this sentiment.
The firm suggests that buying O'Reilly Automotive's stock during an earnings-related decline could be a profitable strategy, as has been the case historically.
In other recent news, O'Reilly Automotive Inc. has reported third-quarter earnings and revenue that did not meet analyst expectations. The auto parts retailer posted adjusted earnings per share of $11.41, falling short of the consensus estimate of $11.54. Revenue came in at $4.36 billion, which was below analysts' projections of $4.43 billion.
Despite the lower than expected results, the company did see a 4% YoY increase in revenue and a 1.5% growth in comparable store sales.
In light of recent developments, O'Reilly Automotive has revised its full-year comparable store sales guidance to 2-3% from the previous range of 2-4%. The company now expects fiscal 2024 earnings per share between $40.60 and $41.10, and full-year revenue is projected at $16.6-16.8 billion. Both forecasts are slightly below analyst estimates.
Despite the challenging quarter, O'Reilly Automotive reported continued market share gains in its professional business and opened 47 new stores across its operations in the U.S., Mexico, and Canada.
The company also repurchased $541 million worth of its stock in the third quarter.
InvestingPro Insights
To complement DA Davidson's analysis, InvestingPro data offers additional insights into O'Reilly Automotive's financial position. Despite the recent challenges in meeting quarterly expectations, the company maintains a strong market presence with a substantial market capitalization of $69.56 billion.
InvestingPro Tips highlight that O'Reilly Automotive is trading near its 52-week high, which aligns with DA Davidson's observation of the stock's resilience. The company's P/E ratio of 29.89 suggests it's trading at a premium, which InvestingPro notes is high relative to near-term earnings growth. This valuation could reflect the market's confidence in O'Reilly's long-term prospects, supporting DA Davidson's "Best-of-Breed Bison" classification.
Financially, O'Reilly Automotive appears robust with a revenue of $16.28 billion over the last twelve months and a healthy gross profit margin of 51.16%. The company's operating income margin of 19.86% indicates efficient operations, which may provide a buffer against the current headwinds mentioned in the article.
For investors seeking more comprehensive analysis, InvestingPro offers 13 additional tips for O'Reilly Automotive, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.