On Friday, Jefferies maintained a positive stance on O'Reilly Automotive (NASDAQ: ORLY), raising the stock's price target to $1,400 from $1,260, while keeping a Buy rating on the shares.
The adjustment followed the company's third-quarter earnings release, which reported earnings per share (EPS) of $10.55. This figure fell short of both the firm's estimate of $10.83 and the consensus of $10.98. A modest same-store sales increase of 1.5% was also below the anticipated 2.5%.
The company's performance in the do-it-for-me (DIFM) segment showed moderation, growing at a mid-single-digit percentage rate, which is a deceleration from the mid-double-digit growth seen in the third quarter of 2023. Additionally, the do-it-yourself (DIY) segment experienced a 1.0% year-over-year decline, attributed to a lower ticket count.
O'Reilly Automotive's management has revised its 2024 guidance downwards, now expecting EPS to be between $40.60 and $41.10 and same-store sales growth to be in the range of 2-3%. This revision takes into account the anticipated continuation of macroeconomic pressures for the rest of the year 2024.
Despite the tempered guidance for the upcoming year, the analyst noted that the fourth quarter is expected to benefit from a series of "easy" comparable periods from the previous year. Furthermore, the underlying demand drivers, such as vehicle miles traveled (VMT), continue to show positive trends, which could support the company's performance moving forward.
In other recent news, O'Reilly Auto (NASDAQ:ORLY) Parts opened 47 new stores in Q3, bringing the total to 111 for the year, with plans to reach 190 to 200 store openings for 2024.
Despite pressures, management is confident in long-term industry growth and plans to enhance supply chain capabilities with new distribution centers. They also see significant growth opportunities in the Northeast U.S., particularly in New England and the DC Metro area. However, sales softened in August and September due to challenging industry demand and Hurricane Helene, and DIY sales declined approximately 1%.
The company's executives addressed concerns about tariffs, indicating readiness to pass costs to consumers, and noted a reduction in reliance on Chinese suppliers. They also acknowledged the challenge of rising construction costs while maintaining positive store economics.
These are among the recent developments in O'Reilly Auto Parts' business strategy and performance.
InvestingPro Insights
Despite O'Reilly Automotive's recent earnings miss and revised guidance, InvestingPro data reveals some positive aspects of the company's financial health. The company boasts a market capitalization of $69.39 billion and has demonstrated strong profitability, with a gross profit margin of 51.21% for the last twelve months as of Q3 2024. Additionally, O'Reilly has shown impressive revenue growth of 5.25% over the same period.
InvestingPro Tips highlight that O'Reilly has been profitable over the last twelve months and analysts predict continued profitability this year. The company has also delivered a high return over the last decade and a strong return over the past five years, aligning with the analyst's positive long-term outlook despite short-term challenges.
It's worth noting that O'Reilly is trading near its 52-week high, with a price-to-earnings ratio of 29.69. This valuation metric, combined with the InvestingPro Tip indicating that the stock is trading at a high P/E ratio relative to near-term earnings growth, suggests investors should carefully consider the current price levels in light of the company's revised guidance.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for O'Reilly Automotive, providing deeper insights into the company's financial position and market performance.
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