Is O'Reilly Automotive Stock a Buy After Recent Earnings?

Key Points

• The auto parts retailer posted encouraging growth figures in its second quarter.

• It broadly met analyst estimates on both the top and bottom lines for the period.

• 10 stocks we like better than O'Reilly Automotive ›

O'Reilly Automotive (NASDAQ: ORLY) is a stock that's really motored ahead recently. In early September the auto parts supplier hit its all-time high, which is saying something given that its shares rolled onto the exchange way back in 1993.

An accelerating stock price, however, always raises the question of whether a company has become fairly valued, or even too pricey. Let's take a look at O'Reilly's recent performance to judge which category it belongs to.

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Foot on the gas

O'Reilly's second-quarter results, published near the end of July, revealed that total sales rose by 6% year over year to $4.5 billion, on the back of a more than 4% increase in same-store sales. GAAP net income advanced 7% to $669 million, or $0.78 per share. Both headline numbers were essentially in line with the consensus analyst projections.

Image source: Getty Images.

O'Reilly raised its full-year 2025 guidance for same-store sales growth. Based on recent sales trends it's observed, the company said, it now feels that "comps" will rise by 3% to 4.5%. This was up notably from its previous forecast of 2% to 4%.

O'Reilly's drive into record share-price territory occurred in the weeks after the earnings report was published. The stock is up by over 10% since that time, easily outpacing the less than 3% growth of the bellwether S&P 500 index.

The tariff roadblock

I feel that the company's very positive momentum is due less to those quarterly figures and more to broad trends that favor its business. Auto sales have been relatively sluggish in this country, which isn't great for manufacturers and dealerships, but beneficial for parts retailers like O'Reilly.

Also, tariffs are affecting manufacturers -- those of foreign vehicles especially, but also their domestic peers, as the levies can push component prices higher (and, thus, the prices of new rides). Again, this plays nicely into the hands of after-market parts retailers.

All in all, this is a good time to be an O'Reilly shareholder. The stock is relatively expensive, but I think it can go even higher.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.