Auto Parts Retailer O’Reilly Automotive Nears Buy Point, Boasts Spectacular Earnings Growth

Auto parts retailer and Nasdaq 100 component O’Reilly Automotive (ORLY) is in a base and nearing a buy point. ORLY stock is Wednesday’s IBD 50 Stocks To Watch pick.


The auto parts retailer operates 6,000 stores in 47 U.S. states and 42 Orma Auto Partes stores in Mexico; it also has a profitable online presence. O’Reilly plans to open 180 to 190 new stores in 2023.

The company sells a wide range of auto parts, tools, supplies and accessories to consumers and professional service providers. Stores offer myriad services, including battery testing and replacement, drum resurfacing, and a tool lending service.

The average age of a U.S. automobile rose to 12.2 years last year, according to Statista. O’Reilly benefits greatly from consumers forced to maintain these aging vehicles and return to office commutes, as well as resume road trips following the pandemic.

Another catalyst: The average price of a new automobile is nearing $50,000, according to Kelly Blue Book, as reported in a recent Barron’s article.

ORLY is ranked second out of eight stocks in the Retail/Wholesale-Auto Parts industry group, which holds a humble 114th place out of the 197 IBD groups.

Auto Parts Stock Forms Third Base in Five Months

The auto parts stock is in a newly formed cup base and nearing the 874.04 buy point. ORLY shares took off in heavy volume after the company reported better-than-expected Q4 earnings and sales in February.

Shares climbed to a peak of 873.94 and rolled over, falling below the 50- and 200-day moving averages. The stock recovered last month, despite market uncertainty from the banking crisis.

ORLY reclaimed those moving averages in lighter-than-average daily volume, forming the right side of the cup as the market started to recover.

The auto parts stock has traded rangebound since November, when it was in a double-bottom base with a 856.67 buy point.

Shares are about 1% off the 52-week high and have gained 2% so far this year. In contrast, the S&P 500 has risen 6% since the start of January.

Years Of Consistent Earnings Growth

Q4’s 10% EPS growth lagged the 14% reported in Q3, but exceeded Q2’s 5%. Comparable-store sales grew 9%, adding to 30 straight years of sales growth since O’Reilly went public in April 1993.

Sales growth accelerated to 11%, from 9% and 6% in the last two quarters, a positive trend. The company posted $14.41 billion in 2022 full-year revenue and forecast $15.2 billion to $15.5 billion this year.

Analysts expect 10% EPS growth for 2023 and 11% for 2024. O’Reilly reports Q1 earnings on April 26.

Mutual funds own 48% of shares and are buying more, with 2,334 funds owning the auto parts stock in March, up from 2,245 in December.

Strong Recycling Initiative

O’Reilly recycled over 9.4 million lead batteries, over 890,000 oil filters and more than 9.6 million gallons of used motor oil in 2021.

The chain also sells remanufactured parts, which use about 85% of materials from original parts, conserving raw materials and energy.

Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.


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