Today, O'Reilly (NASDAQ:ORLY) Automotive Inc. (NASDAQ:ORLY) announced the issuance and sale of $500 million in senior notes with a 5.000% interest rate, maturing on August 19, 2034. The automotive parts retailer entered into an agreement that was detailed in an 8-K filing with the U.S. Securities and Exchange Commission.
The notes, which are unsecured and unsubordinated, will pay interest semi-annually starting February 19, 2025. They rank equally with O'Reilly's existing and future unsecured and unsubordinated debt. The company's existing credit facility and other senior notes, ranging from 1.750% to 5.750%, are on equal footing with the new issuance.
The indenture, which includes the terms for the notes, was supplemented on the closing date, August 19, 2024. U.S. Bank Trust Company, National Association, serves as the trustee for the notes.
O'Reilly Automotive has the option to redeem the notes before their maturity date, with redemption prices varying depending on the timing of the redemption. If redeemed prior to May 19, 2034, the price will be the greater of a calculated sum based on the Treasury Rate plus 20 basis points or 100% of the principal amount. After the Par Call Date, the redemption price equals 100% of the principal amount plus accrued interest.
The company has also outlined specific scenarios under which subsidiary guarantees would be triggered for the notes. The indenture includes covenants that limit the company's ability to incur certain liens, enter into sale and leaseback transactions, and merge or consolidate with other companies, among other restrictions.
In the event of a 'Change of Control Triggering Event,' holders of the notes have the right to require O'Reilly to repurchase their notes at 101% of the principal amount plus accrued interest.
This financial move is based on a press release statement and provides O'Reilly Automotive with additional capital, potentially for business expansion, refinancing existing debt, or other corporate purposes.
In other recent news, O'Reilly Automotive reported second-quarter earnings per share (EPS) of $10.55, falling short of the estimated $10.83.
The company revised its full-year 2024 guidance, expecting EPS to range from $40.75 to $41.25 and comparable store sales growth between 2% and 4%. Amid these adjustments, Jefferies increased O'Reilly's price target to $1,260, maintaining a Buy rating, while RBC Capital reduced its price target to $1,115, keeping an Outperform rating.
In addition to these analyst adjustments, O'Reilly Automotive has expanded its presence by opening 37 new stores in the United States and Mexico, and entering the Canadian market through the acquisition of Vast Auto. The company's share repurchase program remains active, with a total investment of $270 million.
InvestingPro Insights
O'Reilly Automotive Inc.'s (NASDAQ:ORLY) recent sale of senior notes comes at a time when the company's financial metrics reveal a stable yet nuanced picture. With a robust market capitalization of $65.09 billion and a P/E ratio standing at 27.93, the company appears to be valued highly by the market, especially considering its last twelve months' revenue growth of nearly 7%. This aligns with the "InvestingPro Tips" which highlight the stock's high revenue valuation multiple and its trading near the 52-week high, indicating investor confidence.
Moreover, the company's gross profit margin of over 51% and an operating income margin close to 20% suggest efficient operations and profitability, corroborated by a strong return on assets of 17.15%. Notably, the "InvestingPro Tips" also underscore the company's ability to cover interest payments with its cash flows and operate with a moderate level of debt, which is particularly relevant in the context of the new debt issuance.
For investors looking at the liquidity aspect, it's important to consider that O'Reilly's short-term obligations exceed its liquid assets. However, the company's historical performance, including a high return over the last decade and profitability over the last twelve months, provides a reassuring backdrop. It's worth noting that the company does not pay a dividend, which may influence investment decisions for those seeking regular income.
For a deeper analysis and additional "InvestingPro Tips", which currently number over 10 for O'Reilly Automotive, investors can visit InvestingPro at: https://www.investing.com/pro/ORLY
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