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​O'Reilly's shares will reach $260 by 09.20.2015
21 august 2015

O'Reilly Automotive (ORLY), a major US specialty retailer and supplier of automotive aftermarket parts, tools, supplies, equipment and accessories, continues to deliver double-digit growth. According to the recently released financial results for Q2 2015, revenue rose by 10% y-o-y to USD 2.04 bn, outpacing the consensus of USD 1.99 bn. LFL sales jumped 7.2% compared to a 5.1% increase in Q2 2014. Operating profit jumped 15% y-o-y to USD 386 mn, while operating margin climbed 0.8 pp to the highest reading of 19%. Adjusted EPS spiked 20% y-o-y to USD 2.29, outstripping the median estimate of analysts of Wall Street by 3 cents.

The company generates a significant cash flow, allowing it to buy back its own shares. O'Reilly generated operating cash flow of USD 698.5 mn in January-June with a 6.6% annual increase. O’Reilly bought back 2.6 mn shares worth USD 575 mn. The company still has USD 700 mn left by the end of Q2 as part of the current buyback program.

O'Reilly aggressively expands its retail network and increase efficiency. The company opened 99 new stores in the first half of the year, as a result total number of its retails stores in 43 states reached 4,465 stores. Average revenue per a store amounted to USD 454,000 compared to USD 433,000 a year ago. Thecompanyplanstoopen 205 newstores.

The company’s management is upbeat about the future. According to the forecast for 2015, EPS is expected to reach USD 8.59-8.69. LFL sales will rise 4-6% y-o-y. The company left its revenue forecast for 2015 unchanged at USD 7.75-7.85 bn, while operating margin growth forecast also remained unchanged at 18.3-18.7%.

We are still upbeat about the mid-term prospects of O’Reilly and raise the target price of the name to USD 265. The short-term technical target is USD 260.

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​O'Reilly's shares will reach $260 by 09.20.2015

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