O’Reilly Automotive Inc ORLY is up 62 percent year-over-year, and one team of analysts expects the run to accelerate.
The Rating
JPMorgan upgraded O’Reilly to Overweight and increased their price target from $311 to $398.
The Thesis
The analysts derived optimism from strength in the broader industry, the firm’s fundamentals, and its do-it-for-me segment, which comprises 43 percent of sales.
By their estimates, O’Reilly’s large supply chain well positions it for market-share expansion, and 2019 through 2021 are expected to see an uptick in aging vehicles with repair needs. At the same time, a colder, snowier winter could drive early demand for seasonal items and heighten demand for maintenance-related parts.
“Moreover, positioning ahead of likely slowing consumption in 2019 after the tax reform-aided pace of the past year, higher rates, and heightened tariff risk, we like the autoparts space (and ORLY's perch) relative to others in our coverage given its failure/maintenance-driven demand and limited price transparency in the DIFM channel,” they wrote in a note.
Overall, JPMorgan sees sustainable earnings-per-share growth with earnings upside. Accordingly, it increased third-quarter same-store-sales forecasts above the 3.6-percent consensus to 4 percent.
Price Action
At time of publication, O'Reilly shares traded up 1 percent to $342.10.
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Photo credit: Michael Barera, from Wikimedia Commons
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