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O'Reilly's shares will reach $225 by 05.10.2015
10 april 2015

We are still upbeat about shares of O'Reilly Automotive (ORLY), a major US specialty retailer and supplier of automotive aftermarket parts, tools, supplies, equipment and accessories. The company continues to deliver double-digit growth. According to the financial report for Q4 2014, revenue increased by 9% y-o-y due to highest growth rate of LFL sales in the sector, adjusted EPS jumped by 26%. The company opened 207 new stores last year, and currently operates 4,366 stores in 43 states. O'Reilly plans to open another 205 stores this year.

Notably, O'Reilly remains friendly to its shareholders, while significant cash flows generated by the company allow it to implement a large-scale buyback program. O'Reilly bought back 5.7 mn of its own shares worth USD 866 bn. The company’s management approved a buyback program totaling USD 500 mn in February in addition to USD 770 mn left over from the previous buyback program.

O’Reilly released a robust guidance for 2015. Revenue is expected to increase by 5-8%, while LFL sales will rose 3-5%, operating margin will reach 18.1-18.5% against 17.6% in 2014, and EPS will be up 12-13%.

In our opinion, recovery of the US economy, as well as a strong reduction in the cost of gasoline in the US will promote greater use of American cars, which, in turn, will support demand for products sold by O'Reilly and similar companies. In addition, O'Reilly benefits from a recognizable brand and a large-scale network, a wide range of products and a high level of service, as well as highly developed distribution channels.

Our target price of O’Reilly shares is USD 225 and rate the name as a Buy in the mid-term. 

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O'Reilly's shares will reach $225 by 05.10.2015

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