O’Reilly shares rise as Jefferies lifts price target to $1,260 By Investing.com

On Friday, O’Reilly Automotive (NASDAQ:) saw its price target increased by Jefferies from $1,225.00 to $1,260.00, while the firm kept a Buy rating on the stock. The adjustment follows O’Reilly’s second-quarter earnings per share (EPS) report, which showed a figure of $10.55, falling short of the estimated $10.83 and the consensus of $10.98. The company’s comparable sales growth of 2.3% also did not meet the consensus expectation of 3.0%.

The reported quarter witnessed a deceleration in the Do-It-For-Me (DIFM) segment, which grew at a mid-single-digit percentage rate year over year, compared to a 9% increase in the previous year. However, this slowdown was partially mitigated by a surge in demand due to June’s heatwave, which helped to counterbalance some of the wider macroeconomic pressures, a milder spring season, and a slight decline in the Do-It-Yourself (DIY) segment.

In response to the evolving economic landscape, management at O’Reilly Automotive has revised its full-year 2024 guidance. The company now anticipates EPS to be in the range of $40.75 to $41.25 and expects comparable store sales growth to be between 2% and 4%. Despite these adjustments, Jefferies notes that softer comparisons in the second half of the year could help to limit potential downside risks.

Jefferies also pointed out that despite the broader economic slowdown, O’Reilly Automotive continues to exhibit signs of market share gains. This positive outlook from the firm underpins the decision to maintain a Buy rating and raise the stock’s price target, signaling confidence in the auto parts retailer’s performance amid challenging conditions.

In other recent news, O’Reilly Automotive has seen a flurry of analyst activity. RBC Capital updated its price target for the company to $1,115 from $1,124, maintaining an Outperform rating. The firm noted challenges in the second quarter, such as unfavorable weather and consumer spending softness, but acknowledged O’Reilly Automotive’s market share gains and adaptability. RBC also revised its 2024 and 2025 comparable sales growth estimates and earnings per share projections.

Similarly, DA Davidson raised its price target for O’Reilly Automotive to $1,275, highlighting the company’s ability to navigate a challenging consumer environment. Truist Securities also increased its price target to $1,204, noting the company’s steady commercial growth and robust cash flow. However, Barclays maintained an Equalweight rating and a price target of $986, citing potential demand challenges.

In terms of earnings, O’Reilly Automotive reported first-quarter earnings per share of $9.20, slightly below the consensus estimate. The company’s full-year 2024 guidance, with an earnings per share range of $41.35 to $41.85, trails the analyst consensus.

On the expansion front, O’Reilly Automotive has opened 37 new stores in the United States and Mexico and entered the Canadian market through the acquisition of Vast Auto. The company’s share repurchase program remains active, having bought back 0.3 million shares for a total investment of $270 million. These are some of the recent developments at O’Reilly Automotive.

InvestingPro Insights

Following the recent earnings report and subsequent price target increase by Jefferies, O’Reilly Automotive (NASDAQ:ORLY) presents a mixed bag of financial metrics and analyst expectations. The company’s market capitalization stands robust at $64.9 billion, and it boasts a healthy gross profit margin of 51.16% for the last twelve months as of Q2 2024. Despite a revenue growth of 6.99% in the same period, concerns arise as the stock is currently trading at a high P/E ratio of 27.89, which is slightly above the adjusted P/E ratio of 27.48, indicating a premium valuation relative to near-term earnings growth.

InvestingPro Tips suggest caution; 13 analysts have revised their earnings downwards for the upcoming period, and the Relative Strength Index (RSI) indicates the stock is in overbought territory. Additionally, the stock’s high revenue valuation multiple and the fact that short-term obligations exceed liquid assets may warrant closer scrutiny by investors. On the brighter side, cash flows can sufficiently cover interest payments, and analysts predict the company will remain profitable this year, with a notable high return over the last decade.

For investors seeking a deeper dive into O’Reilly Automotive’s financial health and future prospects, additional analysis is available. There are 12 more InvestingPro Tips that could provide valuable insights for those considering an investment in ORLY. To explore these tips and refine investment strategies, readers are invited to use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.

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