O’Reilly Automotive Inc. (ORLY) posted a 23% increase in earnings to $1.40 per share in the fourth quarter of 2013, compared with $1.14 in the year-ago quarter. Earnings also exceeded the Zacks Consensus Estimate of $1.32. Net income improved 15% to $152 million (9.4% of sales) from $133 million (8.9%) in the fourth quarter of 2012.
Quarterly revenues scaled up 9% to $1.62 billion from $1.49 billion in the same period a year ago. Revenues surpassed the Zacks Consensus Estimate of $1.6 billion. Comparable store sales increased 5.4% in the reported quarter versus 4.2% in the fourth quarter.
Gross profit ascended 9% to $819 million (50.5% of sales) from $750 million (50.4% of sales) a year ago. Selling, general and administrative expenses rose 7% to $564 million (34.8% of sales) from $527 million (35.4%) in the year-ago quarter. Operating income increased 15% to $256 million (15.8% of sales) from $223 million (15% of sales) for the same period last year.
2013 Results
O’Reilly reported earnings of $6.03 per share in 2013, rising from $4.75 in 2012. Earnings per share surpassed the Zacks Consensus Estimate of $5.96.
Revenues increased 8% to $6.65 billion from $6.18 billion in 2012, exceeding the Zacks Consensus Estimate of $6.63 billion.
Store Update
During the quarter, O’Reilly opened 32 stores and closed 1 store, bringing its total store count to 4166 in 42 states as of Dec 31, 2013. Sales per weighted average-store increased to $387,000 from $377,000 a year ago.
Share Repurchases
During the quarter, O’Reilly repurchased 2 million shares of its common stock for $246 million, reflecting an average price of $124.11. During 2013, the company bought back 8.5 million shares for $933 million at an average price of $109.38.
Since the inception of the share repurchase program in Jan 2011, O’Reilly has repurchased a total of 40.6 million shares for $3.35 billion, reflecting an average price of $82.61.
Concurrently, the board of directors approved a $500-million increase in the share buyback authorization to $4 billion. As of Feb 5, 2014, the company had remaining shares repurchase authorization worth approximately $645 million under its share repurchase program.
Financial Position
O’Reilly had cash and cash equivalents of $231.3 million as of Dec 31, 2013, compared with $248.1 million as of Dec 31, 2012. Long-term debt increased to $1.4 billion as of Dec 31, 2013 from $1.1 billion as of Dec 31, 2012. This translated into a long-term debt-to-capitalization ratio of 41.5% as of Dec 31, 2013 compared with 34.2% as of Dec 31, 2012.
In 2013, net cash flow from operations declined to $908 million from $1.25 billion in the previous year. Meanwhile, capital expenditures increased to $395.9 million from $300.7 million in 2012.
Guidance
For first-quarter 2014, O’Reilly projects earnings per share in the range of $1.53–$1.57. The company expects consolidated comparable store sales to increase by 4% to 6%.
For full-year 2014, the company expects earnings per share of $6.74 to $6.84. It expects consolidated comparable store sales to increase between 3% and 5% during the year. The company also revealed revenue guidance of $7 billion to $7.2 billion for 2014, gross margin guidance of 50.9%–51.4% and operating margin guidance of 17% to 17.4%.
O’Reilly expects capital expenditures within the range of $390 million to $420 million and free cash flow between $570 million and $620 million for the year.
Based on opportunities for new stores in both existing and new markets, the company plans to open 200 new stores in 2014.
Our Take
O'Reilly Automotive is a prominent player in the automotive replacement parts and accessories industry along with Advance Auto Parts Inc. (AAP), AutoZone Inc. (AZO) and CarMax Inc. (KMX). It sells its products to both Do-it-Yourself (DIY) customers and Do-it-for-Me (DIFM) or professional installers. Currently, it has a Zacks Rank #3 (Hold).
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