It has been about a month since the last earnings report for O'Reilly Automotive (ORLY). Shares have lost about 10.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is O'Reilly Automotive due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.
O'Reilly Q1 Earnings Surpass Estimates on Strong Comps Growth
O’Reilly reported first-quarter 2026 adjusted earnings per share (EPS) of 72 cents, which beat the Zacks Consensus Estimate of 69 cents by 4.18%. The bottom line increased from 62 cents in the prior-year quarter.
The automotive parts retailer registered quarterly revenues of $4.56 billion, which surpassed the Zacks Consensus Estimate of $4.47 billion by 2.1%. The top line also rose 10.2% year over year.
The quarter was driven by strong demand, with comparable store sales rising 8.1%. Growth in both the professional and DIY segments, along with careful cost control, supported the overall performance. The company opened 59 stores in the United States, Mexico and Canada in the first quarter. The total store count was 6,644 as of March 31, 2026.
ORLY’s Sales Mix Highlights Professional Momentum
A key feature of the quarter was the continued weight of the professional service provider channel. Sales to professional customers were $2.29 billion, up from $2 billion a year ago, reflecting meaningful growth in the company’s higher-frequency commercial business.
Do-it-yourself demand also contributed, with DIY sales of $2.19 billion versus $2.05 billion in the prior-year quarter. Other sales and adjustments were $79.6 million compared with $86.5 million last year, leaving the mix largely driven by the two core customer groups.
O’Reilly Expands Profit Dollars as Sales Scale
O’Reilly translated the higher sales base into improved profit dollars. Gross profit increased to $2.35 billion, and gross margin held firm at 51.5% of sales versus 51.3% a year ago, indicating pricing and sourcing discipline despite a rising cost environment.
Expense growth remained controlled relative to sales. Selling, general and administrative costs rose to $1.51 billion, but declined to 33% of sales from 33.4% last year. Operating income climbed to $841.6 million, with operating margin improving to 18.5% from 17.9%, underscoring a focus on productivity and prudent expense management.
ORLY Converts Earnings Into Cash and Share Reduction
Cash generation was a standout. Net cash provided by operating activities was $1.03 billion in the quarter, up from $755.1 million in the year-ago period, supported by higher earnings and favorable working-capital movements.
This strong cash generation supported an aggressive capital return program. Capital expenditures were $244.4 million, and free cash flow totaled $785.1 million. ORLY repurchased 10 million shares for $923 million at an average price of $92.45 in the first quarter. From the end of the first quarter until April 29, 2026, it bought an additional 3.6 million shares for $338 million at an average price of $92.83.
O’Reilly’s Balance Sheet Reflects Inventory Investment
As of March 31, 2026, O’Reilly’s cash and cash equivalents totaled $252.6 million, up from $191.2 million a year earlier. Inventory rose to $5.81 billion from $5.17 billion, reflecting a larger store base and the need to support high service levels across both customer segments.
On the funding side, as of March 31, 2026, long-term debt rose to $6.2 billion from $5.65 billion a year ago. Accounts payable increased to $7.24 billion from $6.54 billion, mainly reflecting higher inventory levels. Overall, total assets grew to $16.94 billion from $15.29 billion in the same period last year.
ORLY Lifts 2026 Outlook Across Key Operating Targets
The company maintained its full-year outlook, with total revenues expected between $18.7 billion and $19 billion. Gross margin is projected in the range of 51.5-52%. The effective tax rate is expected to be 22.6%.
It continues to expect 225-235 new store openings and comparable store sales growth of 3-5%. Cash flow guidance remains unchanged, with operating cash flow of $3.1-$3.5 billion, capital spending of $1.3-$1.4 billion, and free cash flow of $1.8-$2.1 billion.
The company now expects operating margin to be in the range of 19.3-19.8%, up slightly from the previous outlook of 19.2-19.7%. Diluted earnings per share are projected between $3.15 and $3.25 compared with the earlier guidance of $3.10-$3.20.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in fresh estimates.
The consensus estimate has shifted -8.66% due to these changes.
VGM Scores
At this time, O'Reilly Automotive has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a score of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise O'Reilly Automotive has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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O'Reilly Automotive, Inc. (ORLY): Free Stock Analysis Report
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