O'Reilly Automotive, Inc. - Momentum

O'Reilly Automotive, Inc. (ORLY) continues to trade within striking distance of its multi-year high at $63.05 in spite of a small pull back over the last few weeks. But with estimates on the rise and a bullish growth projection, this Zacks #2 rank stock provides the right parts for a momentum upgrade.

Our last update on O'Reilly came in late October when the company reported strong Q3 results that came in well ahead of expectations.

Third-Quarter Results

Revenue for the period was up 13% from last year to $1.26 billion. Earnings also came in strong at 86 cents, 16% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 12% over the last four quarters.

The solid quarter was driven by strong same-store sales, up 11.1% from last year. Expenses were also down, with Sales, General and Administrative costs comprising 34.3% of revenue from 36.7% from last year.

But the company is also focused on expanding, opening 48 new stores during the quarter, which put them on track for 170 new stores for the year.

Financial Profile

O'Reilly will also continue to benefit from its strong financial profile, with cash and equivalents of $43 million and total debt of $431 million. It's long-term debt-to-equity ratio of 9.6% is well below the industry average of 79.5.

Estimates

We saw some decent movement in estimates off the good quarter, with the current 14 cents to $3.01 while the next-year estimate gained 16 cents to $3.46, a solid 15% growth projection.

Valuation

But in spite of the gains, the valuation picture still looks good, with a forward P/E of 16.5X against the industry average of 17X.

2-Year Chart

On the chart, shares have recently pulled back a bit, but the long-term trend is still strong. Look for support from the trend line on any weakness, take a look below.

Read the May 21 ORLY article here

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Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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