O’Reilly Automotive stock soars to 26-year high

O’Reilly Automotive Inc. (NASDAQ: ORLY) stock soared to a 26-year high of $398.41 on Thursday. Investors remained positive on the automobile parts retailer following exceptional customer service and expense control for the fourth quarter. However, analysts were concerned about worries over negative money flows.

Majority of the analysts recommended a “strong buy” or “buy” rating with a price target of $395.58. They believe the company boasts a diverse automotive product line, supplying new and remanufactured auto parts maintenance items, a full lineup of automotive tools, as well as service equipment.

For the past couple of decades, the company has sustained consistent revenue expansion, largely due to the auto parts consistent revenue generation model. The consumer preference for used vehicles has been increasing. Along with this, deteriorations in the economy and the overall compulsory demand for automotive supplies turned beneficial for the auto parts sector.

The colder weather was beneficial for O’Reilly Automotive as the harsh weather causes more auto repairs. The auto parts demand was quite sensitive to extreme weather trends as winter 2019 has been solid but not as good as 2018 due to snowfall levels.

For the fourth quarter, the company reported a 1% decline in earnings as the previous year included a benefit related to the initial revaluation of its deferred income tax liabilities and a benefit from the revaluation. However, sales increased by 6% as the company’s commitment to excellent customer service drove a 3.3% rise in comparable store sales, which was above the mid-point of its guidance range.

From a comp store sales progression standpoint, October and November were strong with December being weaker and slightly negative. The December results were down due in part to seasonal business that was put forward into November as it experienced colder weather earlier in the quarter in 2018 than the prior year coupled with a lack of harsh weather in December which the company was facing difficult compares from the past two Decembers.

The company achieved its goal of opening 200 new stores across 36 states in 2018 and was well positioned to continue its profitable store growth in 2019. O’Reilly Automotive set its 2019 target of between 200 and 210 new stores in its third-quarter earnings release in October of 2018, prior to the signing of the Bennett acquisition agreement.

Also read: AutoZone Q2 2019 earnings results

For the first quarter of fiscal 2019, O’Reilly Automotive had expected comparable store sales in the range of 3% to 5%. Earnings were anticipated to be in the range of $3.92 to $4.02 per share.

For fiscal 2019, the company had predicted total revenue in the range of $10 billion to $10.3 billion and earnings in the range of $17.37 to $17.47 per share. Capital expenditures were anticipated to be in the range of $625 million to $675 million and free cash flow was projected to be $1 billion to $1.1 billion.

Shares of O’Reilly Automotive ended Thursday’s regular session up 0.42% at $398.08 on the Nasdaq. The stock has risen over 64% in the past year and over 16% in the past three months.

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