O’Reilly Bumps Up Share Buyback Plan By $1B After 3Q Profit Beat

O’Reilly Automotive’s 3Q earnings of $7.07 per share topped analysts’ estimates of $6.19 and grew 39% from the year-ago quarter, driven by operating margin expansion. Following the earnings beat, the auto parts retailer raised its share repurchase authorization by $1 billion, bringing the total buyback program to $14.75 billion.

O’Reilly’s (ORLY) 3Q revenues of $3.21 billion increased 20.3% year-over-year and outpaced the Street consensus of $2.98 billion. Revenues grew on the back of a 16.9% increase in comparable store sales (comps).

O’Reilly’s CEO Greg Johnson said “Our Team’s hard work and commitment to expense control resulted in another extremely profitable quarter, exemplified by our 22.6% operating profit margin, which represents a 249 basis point improvement over the prior year.” However, he also added that “We continue to maintain a cautious approach to managing our operating costs in these uncertain economic conditions and remain steadfastly focused on providing the excellent customer service that drives long-term profitable growth.” (See ORLY stock analysis on TipRanks)

Following 3Q results, Wells Fargo analyst Zachary Fadem maintained his Buy rating and a price target of $525 (18.7% upside potential). The 5-star analyst said “we continue to view auto part retailers as underappreciated in today’s environment, and are constructive on ORLY’s best-in-class execution, non-discretionary assortment and NT [near term] upside from share gains and incremental stimulus.” He also sees “increasingly favorable risk/reward and would be aggressive buyers on weakness.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 9 Buys and 5 Holds. The average price target of $517.31 implies upside potential of about 16.9% to current levels. Shares are trading about 1% higher than at the beginning of the year.