Key Points The auto parts retailer posted encouraging growth figures in its second quarter. It broadly met analyst estimates on both the top and bottom lines for the period. 10 stocks we like better than O'Reilly Automotive › O'Reilly Automotive (NASDAQ: ORLY) is a stock that's really motored ahead recently. In early September the auto parts supplier hit its all-time high, which is saying something given that its shares rolled onto the exchange way back in 1993. An accelerating stock price, however ...

Core Insights - O'Reilly Automotive has seen a significant increase in its stock price, trading up approximately 33% in 2025 and 10.2% since the second-quarter financial results were reported [1][3] - The company reported revenue growth of 6% and diluted earnings-per-share growth of 11% for the second quarter, with same-store sales (SSS) growth of 4.1% [3][4] - O'Reilly has achieved 32 consecutive years of positive SSS growth, indicating strong and durable demand [4][5] Financial Performance - The company’s revenue and earnings growth remain solid, with a focus on same-store sales as a key performance indicator [3][6] - O'Reilly's management has utilized free cash flow to repurchase shares, resulting in a 3% reduction in outstanding shares over the past year, which positively impacts earnings per share [5][6] Valuation Concerns - Despite the strong performance, the stock's valuation appears stretched, with a price-to-earnings ratio of 38.2, the highest in at least two decades [7][6] - Analysts suggest that while the stock may continue to rise, the current valuation may not be sustainable [7][8]

O’Reilly Automotive (ORLY) stands out for strong technical momentum, new all-time highs, and a consistent “Buy” signal from Barchart indicators. Shares are up more than 42% over the past year. The company boasts robust fundamentals including steady revenue and earnings growth. Despite its strong performance, ORLY is considered volatile and speculative —investors should use strict risk management and stop-loss strategies. Today’s Featured Stock Valued at $90.7 billion, O’Reilly Automotive (ORLY) ...

Core Viewpoint - O'Reilly Automotive has demonstrated remarkable stock performance, with shares increasing by 5,390% over the past 20 years, indicating strong potential for long-term wealth generation for investors [1]. Company Performance - O'Reilly Automotive has achieved consistent same-store sales growth for 33 consecutive years, reflecting a strong demand for aftermarket auto parts and supplies [4]. - The company has experienced a compound annual revenue growth rate of 8.8% from 2014 to 2024, with no down years, including a 14.3% revenue gain in 2020 during the pandemic [7]. Market Dynamics - The average age of passenger cars in the U.S. is increasing, leading to higher maintenance and repair needs, which benefits O'Reilly [5]. - The number of registered vehicles in the U.S. rose by 14.2% from 2013 to 2023, expanding O'Reilly's customer base [6]. Profitability and Financial Health - O'Reilly reported an operating margin of 20.2% in the second quarter, contributing to strong free cash flow generation [9]. - The company utilizes cash from operations for stock buybacks, which reduces the outstanding share count and enhances earnings per share growth [9]. Investment Considerations - While O'Reilly's sales growth is sustainable, it does not exhibit the monster growth typically sought by investors, and its price-to-earnings ratio of 37.3 is considered high historically, posing challenges for future returns [10].

Company Overview - O'Reilly Automotive is recognized as a strong business that embodies the principle of taking simple ideas seriously, reflecting a disciplined approach to its operations [1] Investment Perspective - The company is highlighted as a favorite among investors, suggesting a positive outlook based on its business model and execution [1]

Core Viewpoint - O'Reilly Automotive has shown a positive performance with a 4.8% increase in shares since the last earnings report, outperforming the S&P 500, raising questions about the sustainability of this trend leading up to the next earnings release [1] Financial Performance - O'Reilly reported Q2 2025 adjusted EPS of 78 cents, slightly above the Zacks Consensus Estimate of 77 cents, and an increase from 70 cents in the prior-year quarter [2] - Quarterly revenues were $4,525 million, missing the Zacks Consensus Estimate of $4,532 million, but reflecting a 6% year-over-year increase [2] - Comparable store sales grew by 4.1%, and the company opened 67 new stores in the U.S. and Mexico, bringing the total store count to 6,483 as of June 30, 2025 [3] Cost and Income Analysis - Selling, general and administrative expenses rose by 8% year-over-year to $1.41 billion, while operating income increased by 6% to $914 million [4] - Net income for the quarter was $668.6 million, up from $622.8 million in the same quarter last year [4] Share Repurchase Activity - O'Reilly repurchased 6.8 million shares for $617 million at an average price of $90.71 per share during the reported quarter [5] - An additional 1.7 million shares were repurchased for $160 million at an average price of $91.45 per share from the end of Q2 until July 23, 2025, with nearly $1.16 billion remaining under the current repurchase authorization [5] Cash Flow and Debt - As of June 30, 2025, O'Reilly had cash and cash equivalents of $198.6 million, up from $145 million a year earlier, while long-term debt increased to $5.82 billion from $5.4 billion [6] - The company generated $1.51 billion in cash from operating activities, down from $1.65 billion in the previous year, with capital expenditures totaling $300.7 million compared to $225.4 million a year ago [7] 2025 Outlook - O'Reilly estimates total revenues for 2025 in the range of $17.5-$17.8 billion, up from the previous estimate of $17.4-$17.7 billion, with EPS expected between $2.85-$2.95 [8] - Comparable store sales are projected to grow by 3-4.5%, an increase from the previous estimate of 2-4%, and free cash flow is anticipated to be between $1.6 billion and $1.9 billion [8] - The company plans to open 200-210 stores this year [8] Market Sentiment and Industry Comparison - Since the earnings release, there has been an upward trend in estimates revision for O'Reilly [9] - The stock currently holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [12] - O'Reilly operates within the Zacks Automotive - Retail and Wholesale - Parts industry, where Genuine Parts (GPC) has seen a 2.3% gain over the past month, reporting revenues of $6.16 billion, a year-over-year increase of 3.4% [13]

Group 1 - O'Reilly Automotive's share price has increased over 230% in the last five years, with a recent 15-for-1 stock split and a further rise of more than 10% since then [1][2] - The company plans to open 200 to 210 new stores in 2025, aiming for a total of approximately 6,500 stores, making it one of the largest auto parts retailers by location [2] - O'Reilly has significant growth potential, particularly in the Northeast, where it has fewer than 100 stores in New York and Pennsylvania, and no presence in Delaware, Maryland, or New Jersey [3] Group 2 - O'Reilly's stock price has risen faster than its revenue and profits, currently trading at 34 times forward earnings compared to 25 times two years ago, indicating a premium valuation [5] - While the high valuation may deter value investors, similar trends are observed among peers like Autozone, suggesting that paying a premium for outperforming stocks is common [6] - The stock appears to be a strong buy for growth-focused investors due to its rapid expansion and market position [6]

Group 1: Company Performance - O'Reilly Automotive's share price has increased approximately 240% over the past five years, significantly outperforming the S&P 500's return of 106% [1] - The company has been expanding rapidly by opening new stores and executing stock buybacks, with a recent 15-for-1 stock split in June [2] - In the most recent quarter, diluted earnings per share rose by 11% year over year, and management anticipates a 3% net increase in store count for the year [10] Group 2: Market Conditions - Weak U.S. auto sales and recent trade policy changes are expected to negatively impact new car sales in the short term [3][4] - New tariffs on auto imports and components are likely to increase the price of new cars, which may further reduce demand for both new and used vehicles [4] - A decline in vehicle purchases leads consumers to retain their existing cars longer, increasing the likelihood of needing replacement parts, which benefits O'Reilly [5][8] Group 3: Valuation Concerns - O'Reilly's trailing price-to-sales (P/S) ratio is 5.2, significantly higher than competitors Autozone (3.6) and Advance Auto Parts (0.4) [9] - The company's price-to-earnings (P/E) ratio has reached a multidecade high of 36.4, also above its rivals [9] - Despite high valuations, the company's strong growth prospects justify its premium pricing [9] Group 4: Future Growth Potential - For O'Reilly's share price to double by 2030, a compound annual growth rate (CAGR) of about 15% per year is required, which appears achievable given current market conditions [10] - Additional sales growth may stem from the ongoing weakness in auto sales and a softening labor market, supporting the potential for a 15% CAGR [10]

Core Insights - The rise of artificial intelligence (AI) and stock splits are significant trends boosting equity valuations on Wall Street [1][2] Company Analysis: O'Reilly Automotive - O'Reilly Automotive announced a 15-for-1 forward stock split in 2025, following a significant stock price increase of approximately 65,000% since its IPO in 1993 [6][7] - The average age of cars and light trucks in the U.S. reached an all-time high of 12.8 years in 2025, driving demand for auto parts as consumers keep their vehicles longer [9] - O'Reilly's refined distribution network includes 31 regional distribution centers and over 6,000 retail locations, allowing for efficient inventory replenishment [10] - The company has executed a substantial share repurchase program, spending about $26.6 billion to buy back nearly 60% of its outstanding shares since 2011, enhancing its earnings per share (EPS) [11] Competitor Analysis: AutoZone - AutoZone's shares have increased by over 14,000% since its IPO in 1991, but it has only completed two forward splits [13] - Similar macroeconomic factors benefiting O'Reilly also support AutoZone, as consumers are retaining their vehicles longer [14] - AutoZone is developing over 200 megahubs to improve inventory management, akin to O'Reilly's hub stores [15] - AutoZone has spent approximately $38.1 billion on share repurchases since 1998, retiring 90.3% of its outstanding shares, positively impacting its EPS [17] - Despite strong fundamentals, AutoZone's low percentage of non-institutional investors (9.4%) suggests a lower likelihood of a stock split in the near future [19]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and related notes, offering a detailed view of the company's financial performance and position [ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=ITEM%201%20-%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, shareholders' equity statements, and cash flow statements, along with detailed notes explaining the basis of presentation, segment reporting, fair value measurements, financing activities, share repurchase program, and recent accounting pronouncements [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's financial position, detailing assets, liabilities, and shareholders' deficit at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 (Unaudited) | December 31, 2024 (Note) | | :-------------------------------- | :------------------------ | :----------------------- | | **Assets** | | | | Cash and cash equivalents | $198,613 | $130,245 | | Total current assets | $6,315,806 | $5,839,895 | | Total assets | $15,820,619 | $14,893,741 | | **Liabilities and Shareholders' Deficit** | | | | Total current liabilities | $8,721,886 | $8,283,505 | | Long-term debt | $5,823,744 | $5,520,932 | | Total shareholders' deficit | $(1,231,862) | $(1,370,961) | | Total liabilities and shareholders' deficit | $15,820,619 | $14,893,741 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This statement outlines the company's revenues, expenses, and net income over specific reporting periods Condensed Consolidated Statements of Income (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales | $4,525,058 | $4,272,201 | $8,661,982 | $8,248,441 | | Gross profit | $2,326,538 | $2,168,060 | $4,448,023 | $4,202,232 | | Operating income | $914,470 | $863,298 | $1,655,936 | $1,615,779 | | Net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | | Earnings per share-basic | $0.78 | $0.71 | $1.41 | $1.33 | | Earnings per share-assuming dilution | $0.78 | $0.70 | $1.40 | $1.32 | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement provides a comprehensive view of the company's income, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | | Foreign currency translation adjustments | $45,400 | $(37,672) | $51,378 | $(30,496) | | Comprehensive income | $713,995 | $585,176 | $1,258,458 | $1,139,590 | [Condensed Consolidated Statements of Shareholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Deficit)) This statement details changes in the company's equity accounts, including common stock, retained deficit, and accumulated other comprehensive income Changes in Shareholders' Equity (Deficit) (in thousands) | Item | Balance at Dec 31, 2024 | Net Income (6M 2025) | Total Other Comprehensive Income (6M 2025) | Share Repurchases (6M 2025) | Balance at June 30, 2025 | | :------------------------------------ | :---------------------- | :------------------- | :----------------------------------- | :-------------------------- | :----------------------- | | Common Stock (Par Value) | $8,622 | — | — | $(133) | $8,506 | | Additional Paid-In Capital | $1,454,518 | — | — | $(22,812) | $1,499,288 | | Retained Deficit | $(2,791,288) | $1,207,080 | — | $(1,153,695) | $(2,748,221) | | Accumulated Other Comprehensive Income (Loss) | $(42,813) | — | $51,378 | — | $8,565 | | **Total** | **$(1,370,961)** | **$1,207,080** | **$51,378** | **$(1,176,640)** | **$(1,231,862)** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,511,966 | $1,653,074 | | Net cash used in investing activities | $(594,998) | $(622,455) | | Net cash used in financing activities | $(850,815) | $(1,164,070) | | Effect of exchange rate changes on cash | $2,215 | $(639) | | Net increase (decrease) in cash and cash equivalents | $68,368 | $(134,090) | | Cash and cash equivalents at end of period | $198,613 | $145,042 | | Income taxes paid | $393,872 | $80,401 | | Interest paid, net of capitalized interest | $110,374 | $110,449 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE 1 – BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note describes the accounting principles and conventions used in preparing the financial statements, including significant events like stock splits and tax legislation - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and reflect a **15-for-1 forward stock split** effected on June 10, 2025, with all share and per share information retrospectively adjusted[21](index=21&type=chunk)[22](index=22&type=chunk) - H.R. 1, a tax reform legislation, was signed into law in July 2025, but its impacts are not included in the operating results for the six months ended June 30, 2025, as it occurred after the fiscal quarter end[24](index=24&type=chunk) [NOTE 2 – SEGMENT REPORTING](index=9&type=section&id=NOTE%202%20%E2%80%93%20SEGMENT%20REPORTING) This note details the company's operating segments, revenue streams, and how performance is evaluated by the chief operating decision maker - The Company operates as a single operating segment, the automotive aftermarket parts segment, across the U.S., Canada, and Mexico, with consolidated net income used by the chief operating decision maker to evaluate performance[25](index=25&type=chunk) Automotive Aftermarket Parts Segment Performance (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales | $4,525,058 | $4,272,201 | $8,661,982 | $8,248,441 | | Gross profit | $2,326,538 | $2,168,060 | $4,448,023 | $4,202,232 | | Consolidated net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | [NOTE 3 – VARIABLE INTEREST ENTITIES](index=10&type=section&id=NOTE%203%20%E2%80%93%20VARIABLE%20INTEREST%20ENTITIES) This note explains the company's investments in unconsolidated tax credit fund entities and the associated maximum exposure to losses - The Company has invested in five unconsolidated tax credit fund entities (VIEs) that promote renewable energy, but it is not the primary beneficiary and accounts for these investments using the equity method[29](index=29&type=chunk)[30](index=30&type=chunk) - The maximum exposure to losses associated with these VIEs is limited to the net investment of **$21.2 million** as of June 30, 2025[31](index=31&type=chunk) [NOTE 4 – FAIR VALUE MEASUREMENTS](index=10&type=section&id=NOTE%204%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note provides information on the fair value of financial instruments, including marketable securities and senior notes, and changes in their valuation Marketable Securities Fair Value (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Marketable securities | $64,169 | $65,156 | Senior Notes Fair Value (in thousands) | Item | June 30, 2025 Carrying Amount | June 30, 2025 Estimated Fair Value | December 31, 2024 Carrying Amount | December 31, 2024 Estimated Fair Value | | :-------------------- | :------------------------------ | :--------------------------------- | :---------------------------------- | :----------------------------------- | | Senior Notes | $5,324,367 | $5,258,178 | $5,321,219 | $5,151,768 | - The Company recorded an increase in fair value related to its marketable securities of **$4.0 million** for the three months ended June 30, 2025, and **$3.4 million** for the six months ended June 30, 2025[34](index=34&type=chunk) [NOTE 5 – LEASES](index=14&type=section&id=NOTE%205%20%E2%80%93%20LEASES) This note outlines the total lease costs and cash payments for operating leases, reflecting the company's leasing activities Total Lease Cost (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total lease cost | $147,600 | $135,282 | $293,056 | $265,818 | | Cash paid for operating leases | N/A | N/A | $221,991 | $205,149 | [NOTE 6 – SUPPLIER FINANCE PROGRAM](index=14&type=section&id=NOTE%206%20%E2%80%93%20SUPPLIER%20FINANCE%20PROGRAM) This note details the outstanding obligations under the company's supplier finance programs and their changes over time - Obligations outstanding under supplier finance programs were **$4.9 billion** as of June 30, 2025, an increase from **$4.8 billion** as of December 31, 2024[41](index=41&type=chunk) [NOTE 7 – FINANCING](index=14&type=section&id=NOTE%207%20%E2%80%93%20FINANCING) This note provides comprehensive information on the company's long-term debt, credit facilities, and senior notes, including terms and outstanding amounts Long-term Debt (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Commercial paper program | $500,000 | $200,000 | | Total principal amount of debt | $5,850,000 | $5,550,000 | | Less: Unamortized discount and debt issuance costs | $26,256 | $29,068 | | Total long-term debt | $5,823,744 | $5,520,932 | - The Company has a **$2.25 billion** unsecured revolving credit facility maturing in March 2030, with no outstanding borrowings as of June 30, 2025[43](index=43&type=chunk)[44](index=44&type=chunk) - As of June 30, 2025, the Company had **$5.4 billion** in unsecured senior notes outstanding, due between 2026 and 2034, with interest rates ranging from **1.750% to 5.750%**[50](index=50&type=chunk) [NOTE 8 – WARRANTIES](index=17&type=section&id=NOTE%208%20%E2%80%93%20WARRANTIES) This note details the company's product warranty liabilities, including balances, claims, and accruals over specific periods Product Warranty Liabilities (in thousands) | Item | Amount | | :------------------------------------ | :----- | | Warranty liabilities, balance at December 31, 2024 | $133,251 | | Warranty claims (six months ended June 30, 2025) | $(115,804) | | Warranty accruals (six months ended June 30, 2025) | $120,219 | | Warranty liabilities, balance at June 30, 2025 | $137,720 | [NOTE 9 – SHARE REPURCHASE PROGRAM](index=17&type=section&id=NOTE%209%20%E2%80%93%20SHARE%20REPURCHASE%20PROGRAM) This note outlines the company's share repurchase authorizations, actual repurchases, and remaining authorized amounts - The Board of Directors approved additional **$2.0 billion** authorizations in November 2023 and November 2024, bringing the cumulative authorization to **$27.8 billion**[55](index=55&type=chunk) Share Repurchases (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------- | :------------------------------- | :----------------------------- | | Shares repurchased | 6,804 | 13,273 | | Average price per share | $90.71 | $88.65 | | Total investment | $617,184 | $1,176,612 | - As of June 30, 2025, **$1.3 billion** remained under the share repurchase authorization. Subsequent to quarter-end, an additional **2.6 million** shares were repurchased for **$240.0 million** through August 8, 2025[56](index=56&type=chunk)[57](index=57&type=chunk) [NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=18&type=section&id=NOTE%2010%20%E2%80%93%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) This note details the components and changes in accumulated other comprehensive income (loss), primarily foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) (in thousands) | Item | Balance at Dec 31, 2024 | Change (6M 2025) | Balance at June 30, 2025 | | :------------------------------------ | :---------------------- | :--------------- | :----------------------- | | Foreign currency translation adjustments | $(42,813) | $51,378 | $8,565 | | Total Accumulated Other Comprehensive Income (Loss) | $(42,813) | $51,378 | $8,565 | [NOTE 11 – REVENUE](index=18&type=section&id=NOTE%2011%20%E2%80%93%20REVENUE) This note disaggregates the company's revenue by major customer type, providing insight into sales channels Revenue Disaggregated by Major Customer Type (in thousands) | Customer Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Sales to do-it-yourself customers | $4,280,425 | $4,156,485 | | Sales to professional service provider customers | $4,194,433 | $3,887,350 | | Total sales | $8,661,982 | $8,248,441 | [NOTE 12 – SHARE-BASED COMPENSATION AND BENEFIT PLANS](index=18&type=section&id=NOTE%2012%20%E2%80%93%20SHARE-BASED%20COMPENSATION%20AND%20BENEFIT%20PLANS) This note details the compensation expense related to stock options and other share-based plans, along with matching contributions to benefit plans Share-Based Compensation Expense (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Compensation expense for stock options awarded | $15,630 | $11,337 | | Compensation expense for other share-based plans | $4,500 | $4,600 | | Matching contributions to benefit plans | $28,300 | $26,700 | - The remaining unrecognized compensation expense for unvested stock option awards was **$53.2 million** as of June 30, 2025, to be recognized over a weighted-average period of **2.8 years**[64](index=64&type=chunk) [NOTE 13 – COMMITMENTS](index=22&type=section&id=NOTE%2013%20%E2%80%93%20COMMITMENTS) This note outlines the company's significant contractual commitments, including obligations to purchase renewable energy tax credits - The Company has a remaining commitment of approximately **$340 million** to purchase transferable federal renewable energy tax credits (RETCs), with the final payment anticipated by April 2026[69](index=69&type=chunk) [NOTE 14 – EARNINGS PER SHARE](index=22&type=section&id=NOTE%2014%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note provides a breakdown of basic and diluted earnings per share, including the weighted-average common shares outstanding Earnings Per Share (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | | Weighted-average common shares outstanding – basic | 854,003 | 880,182 | 856,768 | 882,728 | | Weighted-average common shares outstanding – assuming dilution | 858,440 | 885,655 | 861,368 | 888,746 | | Earnings per share-basic | $0.78 | $0.71 | $1.41 | $1.33 | | Earnings per share-assuming dilution | $0.78 | $0.70 | $1.40 | $1.32 | [NOTE 15 – LEGAL MATTERS](index=22&type=section&id=NOTE%2015%20%E2%80%93%20LEGAL%20MATTERS) This note discusses the company's involvement in legal proceedings and management's assessment of their potential financial impact - The Company is involved in litigation incidental to its ordinary business but does not believe these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[73](index=73&type=chunk)[74](index=74&type=chunk) [NOTE 16 – RECENT ACCOUNTING PRONOUNCEMENTS](index=24&type=section&id=NOTE%2016%20%E2%80%93%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note describes recently issued accounting pronouncements and their anticipated impact on the company's financial statements - ASU 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, 2024, and will be adopted by the Company in Q4 2025, with no material impact on financial condition, results of operations, or cash flows as it pertains to disclosure only[75](index=75&type=chunk) - ASU 2024-03 (Income Statement Expenses) is effective for annual periods beginning after December 15, 2026, and will be adopted by the Company in Q4 2027, with no material impact on financial condition, results of operations, or cash flows as it pertains to disclosure only[76](index=76&type=chunk) [ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=25&type=section&id=ITEM%202%20-%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides a narrative of the Company's financial condition, results of operations, and liquidity, highlighting key drivers of the automotive aftermarket industry, sales and profit performance, and capital resources. It also includes forward-looking statements, an overview of the business, and discussions on critical accounting estimates and recent accounting pronouncements [FORWARD-LOOKING STATEMENTS](index=25&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines the nature of forward-looking statements within the report and the various risks and uncertainties that could affect future results - The report contains forward-looking statements identified by words like 'estimate,' 'may,' 'could,' 'will,' 'believe,' 'expect,' 'would,' 'consider,' 'should,' 'anticipate,' 'project,' 'plan,' or 'intend,' which are subject to risks and uncertainties[79](index=79&type=chunk) - Key risks include the general economy, inflation, consumer debt levels, product demand, competition, weather, trade disputes, supply chain disruptions, and governmental regulations[79](index=79&type=chunk) [OVERVIEW](index=25&type=section&id=OVERVIEW) This section provides a general description of the company's business, its operational strategy, and the key market drivers influencing demand for its products - O'Reilly Automotive, Inc. is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the U.S., Puerto Rico, Mexico, and Canada, operating **6,360 stores** as of June 30, 2025[80](index=80&type=chunk) - The Company employs a 'dual market strategy,' selling products to both DIY customers and professional service providers, aiming for growth through new store openings, existing store sales, merchandising enhancements, and Omnichannel initiatives[80](index=80&type=chunk) - Key drivers of demand for automotive aftermarket products include the number of miles driven, registered vehicles, annual rate of light vehicle sales, and average vehicle age, with the average U.S. vehicle age increasing to **12.6 years** in 2024[86](index=86&type=chunk)[88](index=88&type=chunk) [RESULTS OF OPERATIONS](index=29&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, focusing on sales, gross profit, operating expenses, and net income drivers [Sales](index=29&type=section&id=Sales) This section details sales performance, including year-over-year growth, comparable store sales, and new store openings Sales Performance (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales | $4,525 | $4,272 | $8,662 | $8,248 | | YoY Growth | 6% | - | 5% | - | | Comparable store sales growth | 4.1% | 2.3% | 3.9% | 2.8% | | Net new stores opened | 67 | 27 | 105 | 64 | - Sales increases were driven by higher domestic comparable store sales and contributions from new stores, with comparable store sales benefiting from increases in average ticket values and transaction counts for both professional service provider and DIY customers[94](index=94&type=chunk) - The Company anticipates opening **200 to 210** net new stores in 2025[93](index=93&type=chunk) [Gross Profit](index=29&type=section&id=Gross%20Profit) This section analyzes gross profit and its percentage of sales, highlighting factors influencing profitability Gross Profit Performance (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | $2,327 | $2,168 | $4,448 | $4,202 | | YoY Growth | 7% | - | 6% | - | | Gross profit as % of sales | 51.4% | 50.7% | 51.4% | 50.9% | - The increase in gross profit percentage was primarily due to improved acquisition costs and distribution operating efficiencies, partially offset by a greater percentage of sales from professional service provider customers, which carry lower gross margins[96](index=96&type=chunk) [Selling, General and Administrative Expenses](index=29&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) This section examines trends in selling, general, and administrative expenses, including their impact on overall profitability Selling, General and Administrative Expenses (SG&A) (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | SG&A | $1,412 | $1,305 | $2,792 | $2,586 | | YoY Growth | 8% | - | 8% | - | | SG&A as % of sales | 31.2% | 30.5% | 32.2% | 31.4% | - The increase in SG&A dollars was primarily due to additional Team Members and operating expenses supporting increased sales and store count, along with enhancements to store-level compensation and benefits and broad inflationary pressures[97](index=97&type=chunk) [Operating Income](index=29&type=section&id=Operating%20Income) This section presents the company's operating income and its percentage of sales, reflecting core business profitability Operating Income (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating income | $914 | $863 | $1,656 | $1,616 | | YoY Growth | 5.9% | - | 2% | - | | Operating income as % of sales | 20.2% | 20.2% | 19.1% | 19.6% | [Other Income and Expense](index=31&type=section&id=Other%20Income%20and%20Expense) This section details non-operating income and expenses, primarily focusing on interest expense and its impact on net income Total Other Expense (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total other expense | $53 | $52 | $110 | $104 | | YoY Growth | 2% | - | 6% | - | | Total other expense as % of sales | 1.2% | 1.2% | 1.3% | 1.3% | - The increase in total other expense was due to higher interest expense on increased average outstanding borrowings[101](index=101&type=chunk) [Income Taxes](index=31&type=section&id=Income%20Taxes) This section analyzes the provision for income taxes and the effective tax rate, including factors influencing tax expense Provision for Income Taxes (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $193 | $189 | $339 | $342 | | YoY Change | +2% | - | -1% | - | | Effective tax rate | 22.4% | 23.3% | 21.9% | 22.6% | - The decrease in the effective tax rate for both periods was primarily due to the timing of the recognition of tax credits[102](index=102&type=chunk) [Net Income](index=31&type=section&id=Net%20Income) This section presents the company's net income and its percentage of sales, reflecting overall profitability Net Income (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $669 | $623 | $1,210 | $1,170 | | YoY Growth | 7% | - | 3% | - | | Net income as % of sales | 14.8% | 14.6% | 13.9% | 14.2% | [Earnings Per Share](index=31&type=section&id=Earnings%20Per%20Share) This section details diluted earnings per share and the weighted-average common shares outstanding, indicating shareholder value Diluted Earnings Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Diluted EPS | $0.78 | $0.70 | $1.40 | $1.32 | | YoY Growth | 11% | - | 6% | - | | Weighted-average common shares outstanding (diluted, in millions) | 858 | 886 | 861 | 889 | [LIQUIDITY AND CAPITAL RESOURCES](index=31&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section assesses the company's ability to generate and manage cash, covering operating, investing, and financing activities, along with debt and capital strategies - The Company's long-term business strategy requires capital for maintaining existing stores, opening new ones, strategic acquisitions, distribution infrastructure, IT systems, and opportunistic share repurchases[105](index=105&type=chunk) - Primary liquidity sources include cash from operations, borrowings under the unsecured revolving credit facility, commercial paper program, and senior note offerings[105](index=105&type=chunk) [Operating Activities](index=32&type=section&id=Operating%20Activities) This section analyzes cash flows from operating activities, highlighting key drivers of cash generation from core business operations Cash Flow from Operating Activities (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,511,966 | $1,653,074 | | YoY Change | -8.5% | - | | Free cash flow | $904,008 | $1,157,089 | - The decrease in net cash provided by operating activities was primarily due to the timing of payment for transferable federal renewable energy tax credits, partially offset by an increase in operating income[108](index=108&type=chunk) [Investing Activities](index=32&type=section&id=Investing%20Activities) This section details cash flows used in investing activities, including capital expenditures and acquisitions Cash Flow from Investing Activities (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in investing activities | $(594,998) | $(622,455) | | YoY Change | +4.4% (less cash used) | - | | Capital expenditures | $587,685 | $474,607 | - The decrease in net cash used in investing activities was a result of the prior year's acquisition of Vast Auto, partially offset by increased capital expenditures for distribution enhancement and new store growth[109](index=109&type=chunk) [Financing Activities](index=32&type=section&id=Financing%20Activities) This section outlines cash flows from financing activities, such as debt management and share repurchases Cash Flow from Financing Activities (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in financing activities | $(850,815) | $(1,164,070) | | YoY Change | +26.9% (less cash used) | - | | Repurchases of common stock | $(1,176,640) | $(1,063,791) | | Net proceeds (payments) of commercial paper | $298,918 | $(173,500) | - The decrease in net cash used in financing activities was primarily due to net borrowings on the commercial paper program in the current period compared to net paydown in the prior year, partially offset by increased common stock repurchases[110](index=110&type=chunk) [Debt Instruments](index=32&type=section&id=Debt%20Instruments) This section describes the company's various debt instruments, including credit facilities, commercial paper, and senior notes - The Company's debt instruments include a credit agreement, unsecured revolving credit facility, outstanding letters of credit, a commercial paper program, and unsecured senior notes, with further details provided in Note 7[111](index=111&type=chunk) [Debt Covenants](index=32&type=section&id=Debt%20Covenants) This section reports on the company's compliance with debt covenants, including key financial ratios Debt Covenant Ratios | Metric | June 30, 2025 | June 30, 2024 | Covenant Requirement | | :------------------------------------ | :------------ | :------------ | :------------------- | | Consolidated fixed charge coverage ratio | 6.02x | 6.22x | Minimum 2.50:1.00 | | Consolidated leverage ratio | 1.95x | 1.87x | Maximum 3.50:1.00 | - The Company was in compliance with all covenants under its Credit Agreement as of June 30, 2025[46](index=46&type=chunk)[114](index=114&type=chunk) [Share Repurchase Program](index=36&type=section&id=Share%20Repurchase%20Program) This section refers to detailed information on the company's share repurchase program as presented in the financial statement notes - Information regarding the Company's share repurchase program is detailed in Note 9 to the Consolidated Financial Statements[117](index=117&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=36&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section confirms that there have been no material changes to the company's critical accounting estimates since the previous annual report - There have been no material changes in the Company's critical accounting estimates since those discussed in its annual report on Form 10-K for the year ended December 31, 2024[118](index=118&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=36&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This section refers to the detailed information on recent accounting pronouncements provided in the notes to the condensed consolidated financial statements - Information about recent accounting pronouncements is provided in Note 16 to the Condensed Consolidated Financial Statements[119](index=119&type=chunk) [ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=36&type=section&id=ITEM%203%20-%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section details the Company's exposure to market risks, specifically interest rate risk and foreign currency risk, and outlines strategies to manage these exposures. It also confirms no material changes to market risks since the previous annual report [Interest Rate Risk](index=36&type=section&id=Interest%20Rate%20Risk) This section assesses the company's exposure to fluctuations in interest rates, particularly on variable-rate borrowings - The Company is exposed to interest rate risk from variable-rate borrowings under its unsecured revolving credit facility (no outstanding borrowings as of June 30, 2025) and its commercial paper program[120](index=120&type=chunk)[121](index=121&type=chunk) - As of June 30, 2025, **$500.0 million** was outstanding under the commercial paper program at a weighted-average variable interest rate of **4.670%**; a **10%** increase in interest rates would result in an unfavorable annual impact of **$2.4 million** on pre-tax earnings and cash flows[121](index=121&type=chunk) [Cash Equivalents Risk](index=36&type=section&id=Cash%20Equivalents%20Risk) This section discusses the risk associated with the company's investments in short-term, highly-liquid cash equivalents - The Company invests excess cash in short-term, highly-liquid instruments with maturities of **90 days or less**, totaling **$198.6 million** as of June 30, 2025, and expects minimal interest rate exposure[122](index=122&type=chunk) [Foreign Currency Risk](index=36&type=section&id=Foreign%20Currency%20Risk) This section details the company's exposure to foreign currency exchange rate fluctuations, particularly for Mexican peso and Canadian dollar operations - Foreign currency exposure arises from Mexican peso and Canadian dollar denominated revenues and profits, with investments in Mexican and Canadian subsidiaries viewed as long-term[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - Net asset exposure in Mexican subsidiaries was **$432.3 million** at June 30, 2025; a **10%** change in the Mexican peso exchange rate could result in a **$39.3 million** loss[124](index=124&type=chunk) - Net asset exposure in Canadian subsidiaries was **$178.2 million** at June 30, 2025; a **10%** change in the Canadian dollar exchange rate could result in a **$16.2 million** loss[125](index=125&type=chunk) [ITEM 4 - CONTROLS AND PROCEDURES](index=38&type=section&id=ITEM%204%20-%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter [EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES](index=38&type=section&id=EVALUATION%20OF%20DISCLOSURE%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by management - Management, under the supervision of the CEO and CFO, concluded that the Company's disclosure controls and procedures were functioning effectively as of June 30, 2025[128](index=128&type=chunk) [CHANGES IN INTERNAL CONTROLS](index=38&type=section&id=CHANGES%20IN%20INTERNAL%20CONTROLS) This section reports on any material changes to the company's internal control over financial reporting during the fiscal quarter - There were no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[129](index=129&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, other information, exhibits, and signature pages, providing additional context to the financial report [ITEM 1 - LEGAL PROCEEDINGS](index=39&type=section&id=ITEM%201%20-%20LEGAL%20PROCEEDINGS) This section addresses the Company's involvement in legal matters, stating that while litigation is ongoing, it is not expected to have a material adverse effect on the Company's financial position or operations - The Company is involved in litigation incidental to its ordinary business but does not currently believe these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[131](index=131&type=chunk) [ITEM 1A - RISK FACTORS](index=39&type=section&id=ITEM%201A%20-%20RISK%20FACTORS) This section confirms that there have been no significant changes to the risk factors previously disclosed in the Company's annual report - There have been no material changes to the risk factors set forth in the Company's annual report on Form 10-K for the year ended December 31, 2024[132](index=132&type=chunk) [ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=39&type=section&id=ITEM%202%20-%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section reports no unregistered sales of equity securities and details the Company's common stock repurchases during the quarter, including the remaining authorization under its share repurchase program - The Company had no sales of unregistered securities during the six months ended June 30, 2025[133](index=133&type=chunk) Common Stock Repurchases (in thousands, except per share data) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs | | :------------------------------------ | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------ | | April 1, 2025, to April 30, 2025 | 1,790 | $91.68 | $1,772,137 | | May 1, 2025, to May 31, 2025 | 2,175 | $91.03 | $1,574,157 | | June 1, 2025, to June 30, 2025 | 2,839 | $89.86 | $1,319,079 | | Total as of June 30, 2025 | 6,804 | $90.71 | N/A | [ITEM 5 - OTHER INFORMATION](index=39&type=section&id=ITEM%205%20-%20OTHER%20INFORMATION) This section confirms that no Rule 10b5-1 trading agreements were adopted, modified, or terminated by Directors or Officers during the fiscal quarter - None of the Company's Directors or Officers adopted, modified, or terminated a Rule 10b5-1 trading agreement during the fiscal quarter ended June 30, 2025[134](index=134&type=chunk) [ITEM 6 - EXHIBITS](index=40&type=section&id=ITEM%206%20-%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and certifications - The report includes various exhibits such as the Third Amended and Restated Articles of Incorporation, Fourth Amended and Restated Bylaws, First Amended and Restated Credit Agreement, and CEO/CFO certifications under the Sarbanes-Oxley Act[135](index=135&type=chunk) [SIGNATURE PAGES](index=41&type=section&id=SIGNATURE%20PAGES) This section contains the official signatures of the Company's Chief Executive Officer and Chief Financial Officer, certifying the report - The report was signed by Brad Beckham, Chief Executive Officer, and Jeremy A. Fletcher, Executive Vice President and Chief Financial Officer, on August 8, 2025[139](index=139&type=chunk)