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O'Reilly Automotive Inc ORLY

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O'Reilly Continues to Demonstrate Strength Amid Pandemic-Related Volatility; Shares Seem Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Our $485 fair value estimate for narrow-moat O’Reilly Automotive should rise by a mid-single-digit percentage after the company reported third-quarter results that suggest it is ahead of our full-year targets. A loftier near-term outlook and adjustment related to the time value of money drive our planned valuation increase. As we had been more pessimistic than most regarding the impact of diminished economic stimulus on sales, our reaction to the news is more favorable than the shares’ mid-single-digit percentage dip after the announcement. Our long-term estimates should not change materially (mid-single-digit top-line growth, low 20s adjusted operating margin). While we still view O’Reilly as the best positioned of the automotive-part retailers we cover, reflecting its topnotch part availability and dual-market capabilities, we suggest investors await a more attractive entry point.

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Company Profile

Business Description

O’Reilly is one of the largest sellers of aftermarket automotive parts, tools, and accessories, serving professional and DIY customers (41% and 59% of 2020 sales, respectively). The company sells branded as well as own-label products, with the latter category comprising nearly half of sales. O’Reilly had 5,616 stores as of the end of 2020, spread across 47 U.S. states and including 22 stores in Mexico. The firm serves professional and DIY customers through its store network, and also boasts approximately 765 sales personnel targeting commercial buyers.

233 South Patterson Avenue
Springfield, MO, 65802
T +1 417 862-6708
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 77,827