O'Reilly Meets, Raises EPS Outlook - Analyst Blog
28 Julho 2011 - 11:07AM
Zacks
O’Reilly Automotive Inc. (ORLY) revealed a 17%
increase in profit to $133.8 million or 96 cents per share in the
second quarter of the year from $114.6 million or 81 cents per
share during the same quarter of 2010. The profit was in line with
the Zacks Consensus Estimate.
The second quarter of 2010 results excluded the charge related
to the investigation of CSK Auto Corporation – acquired by the
company three years ago – by the U.S. Department of Justice.
The increase in profit was attributable to higher sales and cost
reduction measures, reflected by a lower selling, general and
administrative (SG&A) expenses compared to the 2010
quarter.
Sales in the quarter grew 7% to $1.48 billion from $1.38 billion
a year ago. Comparable store sales increased 4.4% versus 7.9% in
the second quarter of 2010.
Gross profit rose 7% to $719 million (48.6% of sales) from $673
million (48.7% of sales) for the same period a year ago.
SG&A expenses increased 4% to $496 million (33.5% of sales)
from $476 million (34.5% of sales) for the same quarter of
2010.
Operating income (adjusted for the impact of the $15 million
charge related to the legacy CSK DOJ investigation) increased 13%
to $222 million (15.0% of sales) from $196 million (14.2% of sales)
during the second quarter of 2010.
During the quarter, O’Reilly opened 44 new stores, which brings
its total store openings to 99 for the first half of 2011. With
this, the company is on track to reach its goal of 170 (net) store
openings in 2011.
Share Repurchases
During the second quarter, O’Reilly repurchased 3.3 million
shares of its common stock for a total investment of $193 million,
reflecting an average price of $58.44.
During the first six months of 2011, the company repurchased 5.9
million shares of its common stock for a total investment of $338
million, reflecting an average price of $57.16.
Subsequent to the end of the second quarter to date, the company
hardly repurchased any shares of its common stock. As of now, the
company has approximately $162 million remaining under its share
repurchase program, including the newly authorized $500 million
worth of share repurchase by the company's board of directors on
January 11, 2011.
Financial Position
O’Reilly had cash and cash equivalents of $268.8 million as of
June 30, 2011, a substantial improvement from $31.6 million in the
corresponding period a year ago. However, much of O’Reilly’s cash
is locked in huge inventories, which formed a significant 80% of
current assets as of June 30, 2011.
Long-term debt was $498.6 million as of the above date, down
from $584.4 million as of June 30, 2010. This translated into a
long-term debt-to-capitalization ratio of 13.7%, down from 16.6% a
year ago.
In the first half of the year, net cash flow from operations
improved to $561.5 million from $355.7 million in the prior year
period. This was primarily attributed to improved profits and
decreases in inventory and accounts receivables.
Capital expenditures (net) reduced to
$150.0 million from $180.6 million in the first half of
2010. As a result, free cash flow improved to $410.8 million during
the period from $173.5 million a year ago.
Guidance
For the third quarter of the year, O’Reilly has projected
adjusted earnings per share between 98 cents to $1.02 and
consolidated comparable store sales to increase in the range of 2%
to 4%.
For full year 2011, the company anticipates adjusted earnings
per share in the range of $3.53–$3.63 and consolidated comparable
store sales to increase by 3% to 6%. This is higher than the
previous guidance of earnings per share of $3.49 to $3.59.
The company reiterated its revenue guidance of $5.7 billion to
$5.8 billion,
comparable store sales increase guidance of 3%–6%, operating
margin guidance of 14.2%–14.6% and gross margin guidance of
48.4%–48.8%.
It also expects to incur capital expenditures of $290 million to
$320 million and generate free cash flow of $425 million to $475
million for the year.
Our Take
O’Reilly is continuously benefiting from its dual market
strategy and a strong distribution network. As of June 30, 2011,
the company operated 3,657 stores in 39 states. The retailer’s
store base has been strengthened by the acquisition of CSK. These,
along with the improved results, have led the company to retain a
Zacks #2 Rank on its stock, which translates to a short term (1 to
3 months) rating of Buy.
Peer Performance
O’Reilly’s competitor, Genuine Parts Company
(GPC) posted a 22% rise in profit to $151.8 million in the second
quarter from $124.5 million in the year-ago quarter. Earnings per
share were 96 cents, up 23% from 78 cents per share delivered in
the comparable quarter last year. Quarterly EPS also surpassed the
Zacks Consensus Estimate by 7 cents.
GENUINE PARTS (GPC): Free Stock Analysis Report
O REILLY AUTO (ORLY): Free Stock Analysis Report
Zacks Investment Research
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