O’Reilly is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the U.S. Founded in 1957 by the O’Reilly family, the company operated 4,000 stores in 42 states as of Jan. 19, 2013.
Similar to other automotive aftermarket parts and services providers, (AutoZone EPS soars 16%) O’Reilly has benefited from the increasing age of cars in the U.S. as people have chosen to repair rather than replace their vehicles. The average age of cars was 10.8 years in 2011 compared to 10.6 years in 2010 and 8.4 years in 1995. This upward trend has been consistent in every year since 1995 and continued in 2011 despite an overall 500,000 increase in the total number of vehicles on the road.
Sales for the year ended Dec. 31, 2012, increased 7% to $6.18 billion while net income increased 15% to $586 million. Comparable store sales increased 4.2% for the fourth quarter ended Dec. 31, 2012, versus 3.3% for the same period one year ago. Operating margins increased from 15% to 15.8%. Greg Henslee, president and CEO stated, “We are confident the fundamental drivers for demand in our industry remain intact and based on this continued demand, our guidance for 2013 comparable store sales is an increase in the range of 3% to 5%.”
An increasingly aging car fleet is a long-term trend that is likely to benefit O’Reilly and its peers’ sales, earnings and EPS even with a recent resurgence in new car sales. However, O’Reilly has consistently shown that it is better than its peers at converting strong industry dynamics into better margins and same store sales growth with 4.2% growth reported in 2012 and growth of 3% to 5% forecast for 2013. With a PEG ratio of around 0.77 some investors may continue to see value in O’Reilly. (How to value growth stocks)
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