On Wednesday, Roth/MKM initiated coverage on O'Reilly (NASDAQ:ORLY) Automotive (NASDAQ: ORLY) shares, bestowing a Buy rating on the company's stock with a price target of $1,337.00. The firm highlighted O'Reilly's position as the fastest-growing auto parts retailer and distributor in the United States, citing the aftermarket's resilience during economic downturns as a key factor.
The analyst from Roth/MKM underscored the company's industry-leading parts availability and a marketing strategy that is heavily focused on professionals, which accounts for approximately 47% of O'Reilly's sales. These strengths are expected to drive superior same-store sales (SSS) and earnings per share (EPS) growth in the forthcoming quarters.
The 12-month price target of $1,337 is derived from applying a 25x multiple to the firm's forecasted FY26 EPS of $53.46. This valuation also considers an EBITDA multiple of 17x-18x for the FY26 estimated EBITDA of around $4 billion. The analyst's positive outlook is based on the company's solid fundamentals and growth potential in the auto parts industry.
O'Reilly Automotive's new price target reflects confidence in the company's ability to maintain its growth trajectory and capitalize on its market-leading position. The upgrade comes as the firm anticipates continued robust performance from O'Reilly in the auto parts retail sector.
In other recent news, O'Reilly Automotive has been the subject of significant developments. The company reported Q2 earnings per share (EPS) of $10.55, falling short of the estimated $10.83, and anticipates 2024 EPS to range from $40.75 to $41.25. O'Reilly has also grown its footprint by opening 37 new stores in the United States and Mexico and entering the Canadian market through the acquisition of Vast Auto.
In the realm of analyst ratings, Evercore ISI initiated coverage on O'Reilly Automotive with an Outperform rating, while DA Davidson, TD Cowen, and BofA Securities have all maintained their Buy ratings. Morgan Stanley has maintained an Equal-weight rating but increased its shares target to $1,100.
On the legal front, lawmakers are investigating several auto parts retailers, including O'Reilly, for potential trade law violations related to purchases from a Chinese company suspected of evading tariffs. These are among the recent developments surrounding O'Reilly Automotive, emphasizing the importance of earnings, revenue information, and analyst expectations for investors.
InvestingPro Insights
The recent Buy rating and price target of $1,337 set by Roth/MKM for O'Reilly Automotive (NASDAQ: ORLY) aligns with several key metrics and insights from InvestingPro. The company's market capitalization stands at $69.07 billion, reflecting its significant presence in the auto parts retail sector.
O'Reilly's strong financial performance is evident in its revenue of $16.28 billion over the last twelve months, with a notable revenue growth of 6.99%. This growth supports the analyst's view of O'Reilly as the fastest-growing auto parts retailer in the U.S. The company's profitability is also robust, with a gross profit margin of 51.16% and an operating income margin of 19.86%, underscoring its operational efficiency.
InvestingPro Tips highlight that O'Reilly has been profitable over the last twelve months and analysts predict continued profitability this year, aligning with Roth/MKM's positive outlook. Additionally, the stock is trading near its 52-week high, which corroborates the market's confidence in the company's performance and growth prospects.
It's worth noting that InvestingPro offers 12 additional tips for O'Reilly Automotive, providing investors with a comprehensive analysis of the company's financial health and market position.
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