Report) reported its first quarter earnings for
2010 on April 28, 2010. The company has beaten the Zacks Consensus Estimate by of 11 cents per share and its own guidance by 10 cents – 14 cents per share. The market reacted favorably, with share prices rising subsequent to the earnings release.
Analysts were highly optimistic given the company’s impressive results and upgraded outlook as almost every one covering the stock had revised the estimates upward. Below we will cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for both short-term and the long-term outlook for the stock.
First Quarter Review
O’Reilly showed a 55% rise in profits during the quarter on an impressive comparable-store sales (sales for stores open at least one year) growth of 7%. This was driven by the company’s dual market strategy, strong distribution network and cost management actions.
O’Reilly has upgraded its earnings and sales guidance for full year 2010. This can be attributable to the company’s aggressive store expansion strategy that was designed to tap the growing market potential as well as on the positive impact from the acquisition of specialty retailers CSK Automotive Corporation.
For full year 2010, the company anticipates earnings per share in the range of $2.65 to $2.75 and consolidated comparable store sales to increase in the range of 4% to 6%. This is higher than the previous guidance of earnings per share range of $2.50–$2.56 and a rise in consolidated comparable store sales of 3% to 5%.
Earnings Estimate Revisions – Overview
Estimates have improved over the last 30 days, reflecting analysts’ optimism about the stock, driven by the company’s improved results and strong business strategy. The share price movement was favorable as well, suggesting O’Reilly is a good stock to own. Let us delve into the earnings estimate details.
Agreement of Analysts
The table below shows a strong agreement among the analysts regarding the outlook of O’Reilly’s earnings. All analysts covering the stock have revised upward the estimate for 2010 with no downward revisions.
For 2011, the revisions continue to be strong. There were 20 analysts revising the estimate upward while none moved in a downward direction. This commendable trend in estimate revisions predicts a consistent stream of earnings.
Magnitude of Estimate Revisions
Earnings estimates for 2010 have been raised by 18 cents from $2.59 to $2.77 since the earnings announcement. Analysts are even more confident about 2011. They have raised the estimates by 25 cents from $2.93 to $3.18 for the year. Analysts continue to value the stock at an increasing premium.
O’Reilly has a competitive advantage due to its dual market strategy and is continuously benefiting from a strong distribution network. A heavy mix of commercial sales provides O’Reilly with greater exposure to less discretionary sales of hard parts (about 80% of the company’s sales fall into this category) and allows the company to operate in smaller markets.
The acquisition of CSK has positioned the company as a leading auto parts retailer in the U.S. The company expects the deal to boost earnings and result in about $100 million of annual cost savings starting in 2010. O’Reilly continues to open new stores in order to achieve greater penetration in existing markets and to expand into new, contiguous markets.
These factors, as we know, have been helpful in generating impressive results for the company. Further, the company’s confidence regarding its future, as reflected in its upgraded outlook, fires up our optimism about the stock.
As a result, we are maintaining our Zacks #2 Rank on the stock, which translates to a short-term Buy recommendation. Given the impressive earnings and the company’s market position, we also reiterate our Outperform recommendation on the stock for the long-term.
Analysts were highly optimistic given the company’s impressive results and upgraded outlook as almost every one covering the stock had revised the estimates upward. Below we will cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for both short-term and the long-term outlook for the stock.
First Quarter Review
O’Reilly showed a 55% rise in profits during the quarter on an impressive comparable-store sales (sales for stores open at least one year) growth of 7%. This was driven by the company’s dual market strategy, strong distribution network and cost management actions.
O’Reilly has upgraded its earnings and sales guidance for full year 2010. This can be attributable to the company’s aggressive store expansion strategy that was designed to tap the growing market potential as well as on the positive impact from the acquisition of specialty retailers CSK Automotive Corporation.
For full year 2010, the company anticipates earnings per share in the range of $2.65 to $2.75 and consolidated comparable store sales to increase in the range of 4% to 6%. This is higher than the previous guidance of earnings per share range of $2.50–$2.56 and a rise in consolidated comparable store sales of 3% to 5%.
Earnings Estimate Revisions – Overview
Estimates have improved over the last 30 days, reflecting analysts’ optimism about the stock, driven by the company’s improved results and strong business strategy. The share price movement was favorable as well, suggesting O’Reilly is a good stock to own. Let us delve into the earnings estimate details.
Agreement of Analysts
The table below shows a strong agreement among the analysts regarding the outlook of O’Reilly’s earnings. All analysts covering the stock have revised upward the estimate for 2010 with no downward revisions.
For 2011, the revisions continue to be strong. There were 20 analysts revising the estimate upward while none moved in a downward direction. This commendable trend in estimate revisions predicts a consistent stream of earnings.
Magnitude of Estimate Revisions
Earnings estimates for 2010 have been raised by 18 cents from $2.59 to $2.77 since the earnings announcement. Analysts are even more confident about 2011. They have raised the estimates by 25 cents from $2.93 to $3.18 for the year. Analysts continue to value the stock at an increasing premium.
O’Reilly has a competitive advantage due to its dual market strategy and is continuously benefiting from a strong distribution network. A heavy mix of commercial sales provides O’Reilly with greater exposure to less discretionary sales of hard parts (about 80% of the company’s sales fall into this category) and allows the company to operate in smaller markets.The acquisition of CSK has positioned the company as a leading auto parts retailer in the U.S. The company expects the deal to boost earnings and result in about $100 million of annual cost savings starting in 2010. O’Reilly continues to open new stores in order to achieve greater penetration in existing markets and to expand into new, contiguous markets.
These factors, as we know, have been helpful in generating impressive results for the company. Further, the company’s confidence regarding its future, as reflected in its upgraded outlook, fires up our optimism about the stock.
As a result, we are maintaining our Zacks #2 Rank on the stock, which translates to a short-term Buy recommendation. Given the impressive earnings and the company’s market position, we also reiterate our Outperform recommendation on the stock for the long-term.
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