O’Reilly Automotive Inc. (ORLY) recorded a 40% rise in profit to $122.4 million in the third quarter of 2010 from $87.2 million in prior-year quarter. On the basis of earnings per share, the automotive parts retailer topped the Zacks Consensus Estimate of 74 cents by posting a profit of 86 cents, also an improvement from 63 cents in 2009. With this, the company has also beaten its own earnings per share guidance of 69 cents–73 cents for the quarter.
The profits excluded the charge related to the investigation of CSK Auto Corporation – acquired by the company two years ago – by the U.S. Department of Justice (DOJ). The company’s results were attributable to an impressive consolidated comparable store sales growth led by its dual market strategy and strong distribution network as well as warmer weather conditions that lifted the demand for its products.
Sales in the quarter scaled up 13% to $1.43 billion, up from the Zacks Consensus Estimate of $1.37 billion. Consolidated comparable store sales form stores opened for last one year rose 11.1% during the quarter compared with an increase of 5.3% in the same quarter of previous year.
Operating income, excluding the charge related to the DOJ investigation, rose 37% to $205 million (14.4% of sales) from $149 million (11.9% of sales) in the third quarter of 2009.
O’Reilly has opened 48 stores during the quarter, taking store openings in the first nine months of the year to 121. The company stuck to its goal of opening a total of 150 stores in 2010 and has projected to open 170 stores in 2011.
Financial Position
O’Reilly had cash and cash equivalents of $43.2 million as of September 30, 2010, an increase from $29.5 million in the same period a year ago. Long-term debt was $431.3 million as of the above date, down from $703.7 million as of September 30, 2009. This translated into a lower long-term debt-to-capitalization ratio of 12%, significantly down from 21% in the prior year.
In the first nine months of the year, net cash flow from operations more than doubled to $592.6 million from $289 million in the previous year. This was primarily attributed to improved profits, an increase in deferred income taxes and a decline in inventory. Meanwhile, capital expenditure reduced to $276.5 million from $317.2 million in the first nine months of 2009.
Guidance Raised
O’Reilly has projected earnings per share in the range of 56 cents–60 cents and consolidated comparable store sales to increase in the range of 4% to 6% for the fourth quarter of 2010.
For full year 2010, the company anticipates earnings per share (excluding the charge of 15 cents per share related to the DOJ investigation) in the range of $2.94 to $2.98 and consolidated comparable store sales to increase by 7% to 8%. This is higher than the previous guidance of earnings per share of $2.75 to $2.85 and a rise in consolidated comparable store sales of 5% to 7%.
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