On Friday, Guggenheim adjusted its outlook on O’Reilly (NASDAQ:) Automotive (NASDAQ: ORLY) shares by increasing the price target from $1,275.00 to $1,400.00, while reaffirming a Buy rating on the stock. The research firm’s analyst cited several positive indicators for the automotive parts industry and O’Reilly’s business in particular, leading to the revised target. Currently trading near its 52-week high of $1,283.96, the stock has demonstrated strong momentum with a 20.07% return over the past six months. According to InvestingPro analysis, the stock is currently trading above its calculated Fair Value, with 12 additional ProTips available for subscribers.
According to the analyst, recent data from the Bureau of Economic Analysis showed that spending on motor vehicle parts and accessories turned positive in November 2024. Additionally, despite multi-year real growth trends remaining below historical levels, there is an anticipation of improved comparable store sales (comps) over the next 12 months. The company maintains a robust gross profit margin of 51.21%, according to InvestingPro data, positioning it well to capitalize on market opportunities. Discover comprehensive insights and detailed financial analysis in the exclusive Pro Research Report, available to subscribers. This expectation is based on a combination of factors, including O’Reilly cycling through challenging discretionary trends starting in the second quarter of 2025, the probable lingering effects of the disrupted polar vortex in 2025, and projected like-for-like SKU inflation throughout the year.
O’Reilly Automotive is also expected to see an improvement in its EBIT margin, following four years of compression due to strategic investments in areas such as commercial pricing, labor, information technology, occupancy, and depreciation & amortization. The firm anticipates a return to margin expansion, factoring in the potential for more traditional incremental margin growth.
The report from Guggenheim also looked ahead to O’Reilly’s fourth quarter 2024 earnings, which are scheduled to be announced on February 5, 2025, after market close. With analysts forecasting EPS of $41.57 for FY2024 and the company maintaining an overall “GOOD” financial health score from InvestingPro, the firm has raised its estimates for O’Reilly in light of the positive factors mentioned, suggesting confidence in the company’s financial performance and strategic initiatives.
In his statement, the Guggenheim analyst elaborated on the rationale behind the optimistic outlook, “we continue to expect comps to sequentially improve over the next 12 months (potentially back to mid-single digit positive).” He also noted the expectation for O’Reilly’s EBIT margin to enter an expansionary phase, inclusive of more traditional incremental margin potential.
Overall, the updated price target reflects Guggenheim’s positive stance on O’Reilly Automotive’s stock, underpinned by favorable industry trends and the company’s expected financial and operational improvements.
In other recent news, O’Reilly Automotive has disclosed a number of significant developments. First and foremost, the company reported Q3 earnings per share (EPS) of $10.55, slightly missing estimates, and revised its 2024 guidance downward, expecting EPS between $40.60 and $41.10. Additionally, O’Reilly Automotive announced a $2 billion increase in its share repurchase program, bringing the total authorization to $27.75 billion.
The company has also received attention from several analyst firms. Truist Securities maintained a Buy rating with a price target of $1,313. Morgan Stanley (NYSE:) upgraded O’Reilly Automotive’s stock to Overweight, citing a positive business cycle turn and a robust long-term outlook. TD Cowen analysts raised their price target on O’Reilly Automotive shares to $1,400, maintaining a Buy rating. BMO Capital initiated coverage with an Outperform rating and a price target of $1,400.
In terms of geographical expansion, the company opened 47 new stores in Q3, bringing the total to 111 for the year. These are the recent developments in O’Reilly Automotive’s trajectory.
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