Auto parts and accessories retailer O’Reilly Automotive (NASDAQ: ORLY) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 4% year on year to $4.14 billion. The company’s full-year revenue guidance of $17.55 billion at the midpoint came in 0.6% below analysts’ estimates. Its GAAP profit of $9.35 per share was 5.6% below analysts’ consensus estimates.
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O'Reilly (ORLY) Q1 CY2025 Highlights:
- Revenue: $4.14 billion vs analyst estimates of $4.17 billion (4% year-on-year growth, 0.9% miss)
- EPS (GAAP): $9.35 vs analyst expectations of $9.90 (5.6% miss)
- Adjusted EBITDA: $872.1 million vs analyst estimates of $908.5 million (21.1% margin, 4% miss)
- The company reconfirmed its revenue guidance for the full year of $17.55 billion at the midpoint
- EPS (GAAP) guidance for the full year is $43.15 at the midpoint, missing analyst estimates by 2.8%
- Operating Margin: 17.9%, down from 18.9% in the same quarter last year
- Free Cash Flow Margin: 11%, similar to the same quarter last year
- Locations: 6,416 at quarter end, up from 6,217 in the same quarter last year
- Same-Store Sales rose 3.6% year on year, in line with the same quarter last year
- Market Capitalization: $79.77 billion
Brad Beckham, O’Reilly’s CEO, commented, “We are pleased to report a solid start to 2025, highlighted by a 3.6% comparable store sales increase, which was at the high end of our expectations for the quarter. Our comparable store sales increase was comprised of solid growth in both professional and DIY, which grew mid-single digit and low-single digit, respectively, in the first quarter. We are confident in the strength of the fundamental demand drivers in our business, and our Team’s strong execution continues to generate share gains. I would like to express my appreciation to each of our over 93,000 Team Members for their hard work and unwavering dedication to our business and customers.”
Company Overview
Serving both the DIY customer and professional mechanic, O’Reilly Automotive (NASDAQ: ORLY) is an auto parts and accessories retailer that sells everything from fuel pumps to car air fresheners to mufflers.
Auto Parts Retailer
Cars are complex machines that need maintenance and occasional repairs, and auto parts retailers cater to the professional mechanic as well as the do-it-yourself (DIY) fixer. Work on cars may entail replacing fluids, parts, or accessories, and these stores have the parts and accessories or these jobs. While e-commerce competition presents a risk, these stores have a leg up due to the combination of broad and deep selection as well as expertise provided by sales associates. Another change on the horizon could be the increasing penetration of electric vehicles.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $16.87 billion in revenue over the past 12 months, O'Reilly is one of the larger companies in the consumer retail industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. For O'Reilly to boost its sales, it likely needs to adjust its prices or lean into foreign markets.
As you can see below, O'Reilly grew its sales at a mediocre 9.7% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts), but to its credit, it opened new stores and increased sales at existing, established locations.
This quarter, O'Reilly’s revenue grew by 4% year on year to $4.14 billion, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 6.2% over the next 12 months, a deceleration versus the last six years. We still think its growth trajectory is attractive given its scale and implies the market is forecasting success for its products.
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Store Performance
Number of Stores
A retailer’s store count influences how much it can sell and how quickly revenue can grow.
O'Reilly operated 6,416 locations in the latest quarter. It has opened new stores quickly over the last two years, averaging 3.1% annual growth, faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).
O'Reilly has been one of the most successful retailers over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 4.5%. This performance suggests its rollout of new stores is beneficial for shareholders. We like this backdrop because it gives O'Reilly multiple ways to win: revenue growth can come from new stores, e-commerce, or increased foot traffic and higher sales per customer at existing locations.
In the latest quarter, O'Reilly’s same-store sales rose 3.6% year on year. This performance was more or less in line with its historical levels.
Key Takeaways from O'Reilly’s Q1 Results
We struggled to find many positives in these results. Its revenue missed and its full-year EPS guidance fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 1.6% to $1,352 immediately following the results.
O'Reilly may have had a tough quarter, but does that actually create an opportunity to invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
