O’Reilly Auto Reports Better-Than-Feared Q1 Earnings; Shares Up 3%

While Q1 GAAP EPS of $3.97 missed consensus estimates by $0.11, revenue of $2.48B beat by $20M and marked 2.9% year-over-year growth.

“The first two months of the quarter were below our expectations as the mild weather was a headwind to demand in our business, but with the onset of spring weather at the beginning of March sales performance strengthened” commented Greg Johnson, O’Reilly’s CEO and Co-President.

“However, we began to see the significant, negative impact of COVID-19 in the middle of March, as our customers became subject to stay-at-home orders issued across all of our market areas.”

Due to these factors, the first quarter comparable store sales decline of 1.9% did not achieve ORLY’s comparable store sales guidance of growth of 2% to 4%. Indeed, due to negative impact of COVID-19, for the four-week period beginning in the middle of March and through the first two weeks of April, the company’s comparable store sales decreased 13%.

Nonetheless, this gave a more positive outlook than more bearish estimates had suggested.

Wells Fargo analyst Zachary Fadem writes “While Q1 comps (-1.9%) largely matched expectations in a tough environment, we expect ORLY shares and the group to rally… as the important COVID-impacted period (late- March/early-April) proved better (-13%) than more bearish investor expectations (of -20%).”

As a result the analyst reiterated his ORLY buy rating with a $425 price target (15% upside potential). “Considering peer read-throughs ranging down 30-45% (through 4/4), it appears that ORLY is either managing the environment better, or industry trends have improved in the past week (or both)” says Fadem.

He continues to expect improvement potential for the second half of the year as global lockdown restrictions soften.

Overall, the stock has a cautiously optimistic Moderate Buy analyst consensus with a $362 average analyst price target (2% downside potential). (See ORLY stock analysis on TipRanks).

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