O’Reilly Earnings: Industry Demand Has Waned, but Share Gains in Pro Channel Remain Impressive

Wide-moat O’Reilly Automotive's third-quarter results slightly underperformed our expectations. Comparable sales growth of 1.5% trailed our 2.5% forecast, and operating margin declined 80 basis points to 20.5% versus our 20.7% estimate. We expect a soft demand backdrop to persist through the remainder of the year and anticipate lowering our forecasts for 2024 comp growth to 2.5% from 3% and for operating margin to 19.7% from 19.9%. Nonetheless, we do not plan to materially change our $860 fair value estimate as we think O’Reilly’s competitive standing is intact.