Tags: OReilly | Automotive | good | ORLY

O’Reilly Automotive: Good Results in Flat Economy

Friday, 23 Mar 2012 12:56 PM

By Tim Plaehn

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Investors looking for a stock which actually thrives when the economy is bad should take a look at O'Reilly Automotive (ORLY). The auto parts retailer has put up good returns in what has been a flat economy.

O'Reilly Automotive owns the second-largest chain of auto parts stores in the United States, with more than 3,700 stores in 39 states. The company sells new and refurbished parts to do-it-yourself car owners and professional mechanics and shops.

O'Reilly also employs an outside sales force to service automotive repair shops. Organic store growth is 170 to 190 new stores per year. In 2008, O'Reilly acquired CSK Auto, adding 1,340 stores with the acquisition.

For 2011, O'Reilly Automotive reported total revenue of $5.79 billion, up 7 percent from $5.40 billion a year earlier. Adjusted earnings for the year were $3.81 per share, up 25 percent from the $3.05 earned in 2010.

The company reported that free cash flow increased by 134 percent to $791 million in 2011. The O'Reilly share price was 31 percent higher at the end of 2011 compared to a year earlier.

Long-term growth


Through 2011, O'Reilly Automotive has reported 19 consecutive years of record revenue, higher operating income and same-store sales growth. Earnings per share has grown at a 19 percent compound rate over the last 11 years.

For 2012, the Wall Street consensus estimates are earnings of $4.49 per share on 7.5 percent revenue growth.

The demographic factor of individuals maintaining and repairing older cars for longer periods of time has been a strong factor in the company's growth. The automotive aftermarket in the markets O'Reilly services totals $120 billion, leaving plenty of room for continued sales growth.

Recently, however, the analysts at Deutsche Bank and at Robert W. Baird downgraded O'Reilly Automotive to hold/neutral ratings from their previous buy/outperform listings. The analysts at Morgan Keegan upgraded the stock to outperform and increased their target price by $9 per share.

The company reports next on May 9.

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