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On Tuesday, Evercore ISI updated its outlook on O’Reilly Automotive (NASDAQ:ORLY) by increasing the price target to $1,470.00 from $1,450.00 while maintaining an Outperform rating. Currently trading at $1,368.50, InvestingPro analysis indicates the stock is trading above its Fair Value, with a P/E ratio of 33.1x and an EV/EBITDA multiple of 23.2x. The firm anticipates a strong first-quarter performance from the company, despite challenges such as tariffs, adverse weather conditions, and tax refund issues.
According to Evercore ISI, O’Reilly Automotive is expected to report favorable first-quarter results after the market closes on Wednesday. The firm’s own estimates for comparable store sales (comps) and earnings per share (EPS) are at +3% and $9.90 respectively, slightly ahead of the consensus estimates which stand at +2.8% for comps and $9.86 for EPS. The company has already experienced benefits from colder weather from December to February, which likely supported comps within the 2-4% range.
The report from Evercore ISI suggests that O’Reilly Automotive has managed to outperform year-to-date, with a +14% gain compared to a -19% for S&P Retail and -12% for the S&P overall. This success is attributed to the company’s ability to implement effective pricing strategies in the face of increased input costs due to tariffs, as well as navigating potential supply chain disruptions.
Evercore ISI highlighted that as new vehicle prices could potentially rise by 10-15%, the value of the existing U.S. vehicle fleet, which stands at 290 million, is increasing. This is because cash-constrained consumers are more likely to repair and maintain their current vehicles instead of purchasing new ones. O’Reilly Automotive is well-positioned to benefit from this trend, as the firm expects the company to continue outperforming in the market due to its defensive growth strategy and ability to gain market share.
In the analysis, O’Reilly Automotive’s stock is considered to be not inexpensive, trading at approximately 27.5 times Evercore ISI’s projected CY26 EPS of $49.75. The company’s current revenue growth of 5.7% and gross profit margin of 51.2% support this premium valuation. However, the firm believes that the company’s quality and defensive growth merits a premium valuation, with the new price target of $1,470 reflecting a CY26 P/E of 29.5 times. O’Reilly Automotive is also named as one of the "Fab Five" favored retail stocks by Evercore ISI, due to its robust growth prospects and resilience in a volatile consumer environment. For a deeper understanding of O’Reilly’s valuation and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, O’Reilly Automotive reported several key developments that may interest investors. The company has expanded its credit facility to $2.25 billion with a maturity date set for March 2030, enhancing its liquidity and financial flexibility. This move includes a $200 million sub-limit for issuing letters of credit and a $75 million sub-limit for swing line borrowings. Additionally, O’Reilly Automotive increased its commercial paper program to allow for the issuance of notes up to $2.25 billion.
Analyst firms have also weighed in on the company’s prospects. TD Cowen raised its price target for O’Reilly Automotive to $1,600, maintaining a Buy rating, while BofA Securities reiterated a Buy rating with a $1,500 target, noting strong growth prospects and market share gains. Guggenheim also maintained a Buy rating with a $1,475 target, highlighting the company’s strategic positioning amid tariff challenges.
Furthermore, O’Reilly Automotive’s shares, along with other auto parts retailers, saw an increase following the announcement of a 25% tariff on foreign-made vehicles. This development is expected to extend vehicle lifecycles, potentially boosting demand for auto parts. These recent updates underscore O’Reilly Automotive’s strategic maneuvers and analysts’ continued confidence in the company’s market position.
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