On Wednesday, Evercore ISI initiated coverage on O'Reilly (NASDAQ:ORLY) Automotive (NASDAQ: ORLY) with an Outperform rating and a price target of $1,290. The firm highlighted the company's consistent performance and its position within the automotive aftermarket industry. Despite a general downturn in auto aftermarket spending, O'Reilly has managed to achieve significant year-to-date growth, outpacing key indices and competitors.
The company is set to report its third-quarter results after the market closes on October 23, with the earnings call scheduled for the following day. Investors and analysts are keen to observe any indications of comparable sales re-acceleration post-election. O'Reilly's stock has risen by 25% year-to-date, surpassing the S&P Retail Index and competitors such as AutoZone (NYSE:AZO), while significantly leading ahead of Genuine Parts Company (NYSE:GPC) and Advance Auto Parts (NYSE:AAP).
Evercore ISI noted O'Reilly's stock outperformance has been notable this year, even amid weaker comparable sales growth, which is believed to be around 2%, slightly less than the second quarter and below the historical norm. The firm has adjusted its second-half 2024 comp outlook slightly downward to reflect a softer underlying demand trend against a volatile consumer environment.
Looking ahead, Evercore ISI anticipates that normalization of inflation and product mix into 2025 will foster a favorable environment for comparable sales growth exceeding 3%. The analysis will focus on signs of disinflation stabilization, potential re-acceleration of inflation, pent-up versus deferred demand, and the financial well-being of O'Reilly's core low to middle-income consumer base.
The upcoming election is also considered a pivotal factor, with potential implications for tax rates and tariffs under a Trump presidency. In the near term, Evercore ISI expects competitive pressures on peers like Advance Auto Parts and Genuine Parts Company to continue, which may benefit O'Reilly Automotive's relative performance.
In other recent news, O'Reilly Automotive has been the subject of several major developments. Lawmakers are investigating several auto parts retailers, including O'Reilly, for potential trade law violations related to purchases from a Chinese company alleged to be evading tariffs. Additionally, O'Reilly's Q2 earnings per share (EPS) of $10.55 fell short of the estimated $10.83, and the company anticipates 2024 EPS to range from $40.75 to $41.25.
In the world of mergers and acquisitions, O'Reilly Automotive has expanded its presence by opening 37 new stores in the United States and Mexico and entering the Canadian market through the acquisition of Vast Auto.
Turning to analyst notes, DA Davidson, TD Cowen, and BofA Securities have all maintained their Buy ratings on O'Reilly's stock, while Morgan Stanley has maintained its Equal-weight rating but increased its shares target to $1,100. These developments provide a snapshot of the latest happenings at O'Reilly Automotive, emphasizing the importance of earnings, revenue information, and analyst expectations for investors.
InvestingPro Insights
O'Reilly Automotive's strong market position, as highlighted by Evercore ISI, is further supported by recent financial data and insights from InvestingPro. The company's market capitalization stands at an impressive $69.07 billion, reflecting its significant presence in the automotive aftermarket industry.
InvestingPro data shows that O'Reilly's revenue for the last twelve months as of Q2 2024 reached $16.28 billion, with a solid revenue growth of 6.99%. This aligns with Evercore ISI's observation of the company's consistent performance, even in a challenging market environment.
Two key InvestingPro Tips are particularly relevant to the article's context. Firstly, O'Reilly is "Trading near 52-week high," which corroborates the stock's 25% year-to-date rise mentioned in the article. Secondly, the company has shown a "Strong return over the last five years," reinforcing its long-term outperformance against competitors and indices.
These insights complement Evercore ISI's positive outlook on O'Reilly Automotive. Investors interested in a deeper analysis can access 10 additional InvestingPro Tips for ORLY, providing a more comprehensive view of the company's financial health and market position.
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