Nucor earnings beat by $0.08, revenue fell short of estimates
On Monday, TD Cowen analyst Max Rakhlenko increased the price target on O’Reilly Automotive (NASDAQ:ORLY) to $1,600 from the previous target of $1,500, while reaffirming a Buy rating on the company’s shares. Currently trading at $1,412, the stock has delivered impressive returns with a 29.1% gain over the past year and trades at a P/E ratio of 34.5x. The new price target is based on 31.8 times the firm’s FY26E earnings per share (EPS) estimate of $50.29.
Rakhlenko adjusted the first-quarter EPS estimate for O’Reilly Automotive to $9.75, citing lower expected revenues due to a combination of weather-related challenges and a varied consumer environment. Additionally, the analyst slightly reduced the expected earnings before interest and taxes (EBIT) margin to 18.7% due to increased selling, general, and administrative (SG&A) expenses.
Despite the lowered first-quarter projections, the outlook for the second to fourth quarters remains unchanged for the time being. The analyst anticipates a strong positive trend as management is expected to implement tariff increases. These adjustments are predicted to contribute to higher comparable store sales, maintain the gross margin rate, and improve the EBIT margin through SG&A leverage, ultimately leading to an increase in EPS.
Rakhlenko’s analysis suggests that O’Reilly Automotive would need to achieve double-digit top-line growth to maintain its gross margin rate, building upon its current revenue growth of 5.67%. This consideration takes into account the company’s sourcing mix, with 25% coming from China. It also factors in potential tariffs, such as a 45% tariff on Chinese steel and a 145% tariff on other products. The analyst assumes a blend of a 25% steel tariff and a 10% reciprocal tariff on other imports, with manufacturers being able to absorb 25% of the tariff impact. For deeper insights into O’Reilly’s tariff exposure and comprehensive financial analysis, access the detailed Pro Research Report available on InvestingPro.
In other recent news, O’Reilly Automotive has announced a 15-for-1 stock split, contingent upon shareholder approval to increase the authorized share count. This move is intended to make stock ownership more accessible to employees through the company’s stock purchase program. Additionally, O’Reilly Automotive has expanded its financial flexibility by increasing its credit facility to $2.25 billion, with a potential further increase to $3.15 billion. This expansion includes a $200 million sub-limit for letters of credit and a $75 million sub-limit for swing line borrowings.
Guggenheim has reiterated its Buy rating on O’Reilly Automotive, maintaining a price target of $1,475. The firm noted the company’s strong positioning amid rising car prices due to tariffs. Similarly, BofA Securities has upheld its Buy rating with a $1,500 price target, citing O’Reilly’s market share gains and potential for gross margin improvement. The company has also seen positive investor sentiment following the announcement of a 25% tariff on foreign-made vehicles, which is expected to increase demand for auto parts.
O’Reilly Automotive’s strategic initiatives and robust financial performance continue to garner confidence from analysts and investors alike. These developments reflect the company’s efforts to enhance its market position and operational capabilities.
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