End Of Q2 Trends Could Set O'Reilly Up Nicely For The Rest Of The Year

Q2 Results

The Springfield, Missouri-based company reported second-quarter EPS $2.65 on revenue of $2.18 billion. The results did not meet Wall Street expectations of $2.68 for EPS or the $2.19 billion for revenue.

The company now expects third-quarter Q3 EPS $2.77–$2.87, which is lower than the consensus view of $2.93.

Further, O'Reilly Automotive expects full-year earnings to be $10.30–$10.70 per share, with revenue in the range of $8.4 billion–$8.6 billion. The Street had expected EPS of $10.70 on revenue of $8.61 billion.

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"While ORLY's 2Q comp of 4.3 percent was a bit light relative to its recent levels, it seems poised to reaccelerate in 2H," analyst Michael Lasser wrote in a note.

Weather Effects

The recent softness in the company's results was attributed to the weather, with a mild winter and a cool start to the summer. Lasser said the weaker trends gave way to improved results at the end of the second quarter and into July. Importantly, the hot weather is driving elevated sales in seasonal categories including HVAC & batteries.

"We think this should set it up for better results in 2H as the heat persists through the summer," Lasser continued.

Additionally, the analyst said the company could top its own "conservative" FY EPS outlook with superior execution and strong macro environment.

Lasser noted that the company is well positioned to generate about 85 bps of operating margin expansion in the second half given mid-single digit comp growth.

At time of writing, shares of O'Reilly were up 0.52 percent to $290.18.

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