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Morningstar's O'Reilly Automotive Inc Stock Analysis

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O’Reilly’s First-Quarter Results Leave It Poised to Meet Our 2022 Targets; Shares Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

We have a more sanguine view of narrow-moat O’Reilly’s first-quarter results than market sentiment, planning no large change for our $570 per share valuation despite the stock’s low-double-digit percentage plunge in response to the report. O’Reilly’s 4.8% comparable growth (29.6% two-year stack) leaves it poised to approximate our 5% full-year target, and we see little reason to change our long-term expectations (mid-single-digit percentage annual top line growth, low-20s adjusted operating margins). We had been conservative with our 2022 estimates considering difficult comparisons (15% revenue growth last year) and sharply higher fuel costs, and note that O’Reilly’s opening quarter tends to be affected by weather (while snowstorms can boost demand over the year as vehicle wear and tear rises, they can mute first-quarter results as motorists stay home). We believe these factors underlie our differentiated response. But despite the trading swoon, we suggest investors await a more attractive entry point before building a position, as O’Reilly’s best-in-class position does not render it invincible.

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O'Reilly Automotive Inc's Company Profile

Business Description

O’Reilly Automotive is one of the largest sellers of aftermarket automotive parts, tools, and accessories, serving professional and DIY customers (41% and 59% of 2021 sales, respectively). The company sells branded as well as own-label products, with the latter category comprising nearly half of sales. O’Reilly had 5,784 stores as of the end of 2021, spread across 47 U.S. states and including 25 stores in Mexico. The firm serves professional and DIY customers through its store network and also boasts approximately 750 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 Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type Cyclical
Employees 83,636

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