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O'Reilly Automotive Inc ORLY

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Morningstar’s Analysis

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Strong Fourth Quarter, Underwhelming Guidance Leave Our Outlook Intact for O’Reilly; Shares Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Narrow-moat O’Reilly ended 2020 strong, with full-year results slightly ahead of our expectations (adjusted diluted EPS of $23.53 versus our $23.19 target). Although 2021 profitability guidance underwhelmed (19.0% to 19.5% adjusted operating margin range versus our prior 19.6% estimate, likely reflecting a different view of the durability of pandemic-era cost reductions), we still expect mid-single-digit top-line growth against roughly 20% adjusted operating margins on average over the next 10 years. Our $410 per share valuation is unlikely to change significantly, and we still 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 Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 77,827