Industry Overview - The Zacks Automotive - Retail and Wholesale - Parts industry involves retailing, distribution, and installation of vehicle parts and accessories, with options for consumers to choose between DIY and DIFM services [2] - The industry is highly competitive and is undergoing significant changes due to evolving customer expectations and technological innovations [2] Key Growth Drivers - The average age of vehicles in the U.S. has reached a record high of 12.6 years, increasing demand for auto parts as older vehicles require more maintenance [3] - Modern vehicles are becoming more complex, leading consumers to prefer professional repair services, thus boosting the DIFM segment [4] - Auto parts dealers are expanding through acquisitions and digital platforms, enhancing market presence and operational efficiency [5] Electric Vehicle Market Impact - U.S. EV sales reached a record 607,089 units in the first half of 2025, marking a 1.5% year-over-year increase, which is expected to provide a boost to auto parts retailers, especially those with EV-specific components [6] Industry Performance - The Zacks Auto Retail & Wholesale Parts industry ranks 63, placing it in the top 26% of 245 Zacks industries, indicating solid near-term prospects [7][8] - Over the past year, the industry has outperformed both the Auto, Tires and Truck sector and the S&P 500, with a growth of 17% compared to the S&P 500's 13% [10] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 27.27X, higher than the S&P 500's 17.7X and the sector's 21.01X [13] - The industry's EV/EBITDA ratio has fluctuated between 21.41X and 28.32X over the past five years, with a median of 24.67X [14] Company Highlights - **Advance Auto Parts (AAP)**: Focuses on selling replacement parts and has bolstered liquidity through the sale of its Worldpac business for $1.5 billion. The company aims to streamline operations and reduce costs through supply chain consolidation [18] - Advance Auto carries a Zacks Rank 2 (Buy), with a projected EPS growth of 752% year-over-year for 2025 [19] - **O'Reilly Automotive (ORLY)**: A leading player in the aftermarket auto parts space, known for 32 consecutive years of revenue growth. The company plans to increase inventory levels and has committed to share repurchases totaling $2.08 billion in 2024 [22] - O'Reilly Automotive holds a Zacks Rank 3 (Hold), with projected EPS growth of 5.4% for 2025 [23]

Core Viewpoint - Analysts expect O'Reilly Automotive to report quarterly earnings of $0.77 per share, reflecting a 10% year-over-year increase, with revenues projected at $4.53 billion, up 6.1% from the previous year [1] Earnings Estimates - Changes in earnings estimates are crucial for predicting investor reactions, with empirical research showing a strong correlation between earnings estimate revisions and short-term stock performance [2] Key Metrics Forecast - Sales to Do-It-Yourself Customers are estimated at $2.30 billion, indicating a 6.8% increase from the prior year [4] - Sales to professional service provider customers are projected to be $2.13 billion, reflecting a 6.7% year-over-year increase [5] - Other sales and sales adjustments are expected to reach $108.53 million, showing a decline of 12.1% from the previous year [4] Store Metrics - Total number of stores is expected to reach 6,466, up from 6,244 a year ago [6] - Ending domestic store count is projected at 6,341, compared to 6,152 last year [6] - Number of stores opened is estimated at 48, an increase from 27 in the same quarter last year [6] Additional Store Insights - Domestic new stores opened are forecasted at 40, compared to 21 in the same quarter of the previous year [7] - Estimated Mexico stores at the end of the period is 100, up from 69 last year [7] Sales Performance - Sales per weighted-average square foot are expected to reach $91.58 million, compared to $87.88 million in the same quarter last year [8] - Total stores at the beginning of the period are estimated at 6,416, compared to 6,217 a year ago [8] Stock Performance - Over the past month, O'Reilly Automotive shares have returned +3.7%, while the Zacks S&P 500 composite has changed +5.4% [8] - Currently, O'Reilly Automotive holds a Zacks Rank 3 (Hold), indicating performance may align with the overall market in the near future [8]

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Core Viewpoint - O'Reilly Automotive has demonstrated exceptional stock performance, rewarding long-term shareholders significantly, but current valuation raises concerns about future returns for new investors [1][10][12] Group 1: Company Performance - O'Reilly's stock has increased by 502% over the past decade and 57,620% since its IPO in 1993 [1] - The company has shown consistent revenue growth, with a 5.7% year-over-year increase in 2024 and a projected 5.4% growth for the current year [6] - O'Reilly's operating margin has averaged 19.9% over the past decade, indicating strong profitability [7] Group 2: Market Position and Demand - The company benefits from durable demand trends, as vehicle maintenance is necessary regardless of economic conditions [4] - An aging vehicle fleet supports demand for aftermarket auto parts, with the average age of vehicles in the U.S. reaching 12.8 years in 2025, up from 11.5 years a decade ago [5] - O'Reilly's extensive store footprint and brand visibility provide a competitive advantage in a fragmented industry [6] Group 3: Financial Management - O'Reilly's management has effectively utilized excess cash for business expansion and stock buybacks, reducing the outstanding share count by 3% in the last 12 months [7] - The company's stock trades at a price-to-earnings ratio of 34, the highest level since 2000, raising concerns about valuation [10][11] Group 4: Investment Outlook - While O'Reilly possesses favorable investment qualities, the current high valuation suggests that it may not provide life-changing returns for new investors [10][12] - The stock's continued upward trajectory despite valuation concerns indicates market optimism, but investors should consider their own valuation criteria in decision-making [11]

Company Performance - O'Reilly Automotive and AutoZone, Inc. have shown strong performance over the last decade by consolidating the auto parts industry, expanding their network, and returning capital to shareholders [1] Investment Strategy - Triba Research aims to identify high-quality businesses capable of delivering sustainable, double-digit returns over the long term, focusing on companies with strong competitive advantages, operating in growing markets, maintaining low debt levels, and led by skilled management teams [2]

Company Overview - O'Reilly operates 6,152 stores in 48 states, 69 stores in Mexico, and 23 stores in Canada as of June 30, 2024 [15] - The company's last-twelve-months sales reached $163 billion as of June 30, 2024 [15] - O'Reilly's market capitalization was $66 billion as of July 31, 2024 [15] - The split between Do-It-Yourself (DIY) and Professional sales was 53% and 47% respectively for the year ended December 31, 2023 [15] Financial Performance & Guidance - O'Reilly reported a 28% comparable store sales increase year-to-date in 2024 [18] - The company's gross margin was 509% year-to-date in 2024 [18] - Operating margin reached 196% year-to-date in 2024 [18] - Diluted EPS was $1975, with a 3-year CAGR of 9% [18] - O'Reilly generated $12 billion of free cash flow and repurchased $106 billion under the share repurchase program year-to-date in 2024 [18] - The full-year 2024 guidance includes $166 - $169 billion in sales and $4075 - $4125 in diluted earnings per share [20, 116, 120] Strategic Investments & Expansion - O'Reilly expects $900 million - $1 billion in total capital expenditures for 2024 [43] - The company is undertaking distribution network expansion projects in Atlanta, GA, Lakeland, FL, and Stafford, VA [44] - O'Reilly plans to open 190-200 net new stores in 2024 [20, 116] - In Mexico, 7 new stores were opened in the first 6 months of 2024, bringing the total to 69, with 15-20 more expected by year-end [51] - O'Reilly acquired Groupe Del Vasto in Canada in January 2024, adding 2 distribution centers and 23 stores [56]

Core Points - O'Reilly Automotive, Inc. will release its second quarter 2025 financial results on July 23, 2025, after 3:30 p.m. Central Time [1][2] - A conference call to discuss the financial results will take place on July 24, 2025, at 10:00 a.m. Central Time [2][4] - The company operates 6,416 stores across 48 U.S. states, Puerto Rico, Mexico, and Canada as of March 31, 2025 [3]

Investment Rating - The report maintains a positive outlook on the auto parts retailing sector, highlighting it as a favorite for both offensive and defensive investment strategies [4]. Core Insights - The auto parts market is projected to grow to $170 billion, with an annual growth rate of 3-5% expected through 2025, supported by macroeconomic factors, vehicle parc dynamics, and weather conditions [4][21]. - AutoZone (AZO) is identified as a top pick at current prices, while O'Reilly Automotive (ORLY) is noted for its disciplined buying approach. Advance Auto Parts (AAP) is advised to be approached with caution due to potential share loss, and Genuine Parts Company (GPC) is expected to face challenges [4][12]. - The report emphasizes the importance of parts availability, service quality, and pricing in driving success within the sector [5]. Market Dynamics - The auto parts retail market is characterized by a significant number of SKUs (over 125,000), leading to a low inventory turnover rate of approximately 1.5 times per year. This creates a competitive advantage for larger players like the Big 4 [6]. - The report notes that the competitive landscape is shifting, with well-capitalized public companies gaining market share from smaller independents, aided by advancements in technology and inventory management [6][54]. - The report anticipates that artificial intelligence will further enhance market share for AZO and ORLY, while AAP and GPC work on resolving foundational issues [6]. Financial Projections - The report provides a detailed breakdown of the total addressable market (TAM) for auto parts, with retail sales projected to grow from $76.6 billion in 2022 to $77.6 billion in 2025, reflecting a modest growth trajectory [12]. - The commercial segment is expected to grow from $86.5 billion in 2022 to $97.3 billion by 2026, indicating a stronger performance compared to the retail segment [12]. - The report highlights that the Big 4 collectively hold a market share of approximately 30.4%, with AZO and ORLY showing significant gains in their respective shares [12]. Competitive Positioning - ORLY is recognized as the distribution gold standard, with superior parts availability driven by its extensive distribution center (DC) network and fulfillment strategies [54]. - AZO is closing the gap with ORLY through its Megahub strategy, which aims to enhance inventory density and improve service levels [55]. - AAP is attempting to replicate AZO's model but currently lags behind in terms of inventory per store and distribution efficiency [55]. Consumer Trends - The report discusses the impact of electric vehicles (EVs) on the auto parts market, suggesting that while EVs will comprise about 25% of new vehicle sales by 2030, their effect on maintenance demand will be limited in the medium term [8][68]. - Factors such as range anxiety, the need for a national charging network, and the cost of battery replacement are identified as significant hurdles to EV adoption [71]. Economic Indicators - The report outlines various economic indicators that influence the auto parts market, including real GDP growth, miles driven, and disposable income trends, all of which are expected to support market growth in the coming years [21].

Core Viewpoint - The article highlights the potential investment opportunity in O'Reilly Automotive, driven by favorable market trends and the company's strong financial performance, despite concerns over its current valuation [2][10]. Group 1: Market Trends - The average age of vehicles on the road in the U.S. has reached 12.8 years, increasing for eight consecutive years, which is expected to benefit O'Reilly Automotive as older vehicles require more maintenance [5]. - The macroeconomic environment, characterized by high interest rates on auto loans and rising material and labor costs, makes purchasing new vehicles less affordable, leading consumers to invest in repairs for their existing cars [8]. Group 2: Company Performance - O'Reilly Automotive reported a same-store sales increase of 2.9% in 2024, marking its 32nd consecutive year of growth, showcasing its resilience in various economic conditions [9]. - The company has effectively utilized its free cash flow for stock buybacks, reducing its outstanding share count by 24% over the past five years, which may enhance shareholder value [10]. Group 3: Valuation Concerns - Despite the positive growth and demand, O'Reilly's current price-to-earnings ratio stands at 32.8, which is 36% higher than its trailing 10-year average, raising concerns about its valuation [11].

Core Viewpoint - Stock splits can lead to significant positive returns for shares, with an average return of over 25% in the 52 weeks following a split, compared to the S&P 500's average return of under 12% [1][2] Group 1: O'Reilly Automotive - O'Reilly Automotive executed a 15-for-1 stock split, reducing its share price by over 93% from above $1,300 to around $89, making it more accessible for retail investors [3][4][5] - The current price forecast for O'Reilly Automotive is $94.30, indicating a potential upside of 7.36% based on 18 analyst ratings [3][5] Group 2: Interactive Brokers Group - Interactive Brokers performed a 4-for-1 stock split, lowering its share price from just over $200 to around $52, which increases accessibility but may have a limited positive impact [6][8] - The 12-month stock price forecast for Interactive Brokers is $53.38, suggesting a modest upside of 0.55% based on 8 analyst ratings [6][9] Group 3: Pegasystems - Pegasystems executed a 2-for-1 stock split, with the share price moving from just over $100 to around $52, which does not significantly impact its valuation [10][11] - The current price forecast for Pegasystems is $53.36, indicating a potential upside of 4.18% based on 12 analyst ratings [10][11] - Pegasystems has seen substantial growth, with annual contracted revenues increasing over three times to $1.4 billion and free cash flow margins exceeding 42% [12] - The company's GenAI Blueprint tool is expected to drive significant adoption in the second half of 2025, which could enhance its stock performance beyond the effects of the stock split [13][15]