ORLY stock notches record on net income rise

2013 was another banner year on the retail floor and on Wall Street for national auto parts dealer O’Reilly Automotive Inc. (Nasdaq: ORLY).

The Springfield-based company’s stock shot up more than 11 percent between Feb. 5 and 11 when it hit $150 – an all-time high after O’Reilly released its fourth-quarter and year-end earnings report.

Investors took note of O’Reilly Automotive’s $670.3 million net income last year, a 14.4 percent increase compared to 2012, and revenue that climbed 8 percent on the year to $6.65 billion.

Comparable store sales – a key performance indicator for stores that have been open a year – increased 5.4 percent in the fourth quarter and 4.3 percent for the full year.

“We led our industry in comparable-store sales growth, and we set record operating margins for our company. Our stock was up 40 percent on the year, so it was a very good year,” O’Reilly Automotive President and CEO Greg Henslee said.

O’Reilly’s top competitors, AutoZone (NYSE: AZO) and Advance Auto Parts Inc. (NYSE: AAP), each recorded comparable store sales growth of less than 1 percent. With operating margins at a record 16 percent, O’Reilly is projecting comparable store sales growth between 3 and 5 percent in 2014.

After starting 2013 at nearly $90 per share, O’Reilly stock closed Feb. 12 at $151.33 per share.

In 2014, Henslee said the company aims to dispel a myth that auto parts retailers only grow when the economy is struggling. O’Reilly plans to open 200 stores nationwide, this year, a slight increase from 2013.

“We actually do as good if not better in good times because the number of miles driven in the U.S. increases, and our customers’ pocketbooks aren’t quite as tight,” Henslee said.

“History has shown us that we are recession-resistant, but I think we probably do a little better in good times when customers aren’t under as much stress.”

Fourth-quarter profit landed at $152.3 million, a 14.7 percent increase compared to $132.8 million in the same quarter a year ago.

Henslee said the Northeast remains a primary growth target for O’Reilly. In late 2012, the company acquired 56 stores in New England from Maine-based VIP Parts Tire & Service. O’Reilly currently is developing a 370,000-square-foot Northeast distribution center in Boston that would nearly quadruple the size of its current regional distribution center.

“That acquisition included a small distribution center in Lewiston, Maine. We are in the process now of renovating a distribution center we bought down in Boston,” Henslee said, adding the company should move in by the end of the year. “It is larger, and that will allow us to continue growth in the Northeast.”

In January, the company’s 25th distribution center opened in central Florida, and the distribution network now supports 4,166 stores across the country. As of Dec. 31, the retailer employed 61,909 and held assets of $6.1 billion.

On Feb. 5, along with its earnings release, O’Reilly’s board of directors approved a repurchase plan for an additional $500 million in shares, bringing its aggregate authorization under the buy-back program to $4 billion.

The company is still in an acquisition mode, too, Henslee said, though he noted no immediate deals are in the works.

“We continue to look at potential small-acquisition targets, where we have an opportunity to acquire some companies that operate in markets where we are maybe not doing business,” Henslee said.

Company officials have said Florida is a target growth market.

O’Reilly posted 2013 diluted earnings per share of $6.03, a jump of $1.28 from 2012.

The increase marks the retailer’s fifth consecutive year of 25 percent or greater adjusted share earnings growth.

Based on recent same-store sales, Wall Street analysts have tabbed O’Reilly’s stock as favorable to its closest competitors. AutoZone leads the market with $9.1 billion in revenue in fiscal 2013. It has more total stores with 5,210, and its stock was trading above $540 a share on Feb. 13. Advance Auto trails O’Reilly with $6.49 billion in sales last year and 4,049 stores. Its stock was trading at $126 a share on Feb. 13.