O'Reilly Automotive, Inc. ORLY(NAS) Profile Profile
Morningstar Equity Research
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Profile Pricing data through 28 Dec 2010
In addition to this comprehensive company profile, Morningstar offers in-depth analyst research and ratings on selected companies. For information about our full analyst coverage, please contact: Morningstar Equity Research +1 (312) 696-6869 [email protected]
Contents Company Profile
1
Company Data
2
Management & Ownership
3
Industry Focus
4
O’Reilly Automotive, Inc. was incorporated in 1957 as a corporation. It is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, selling its products to both do-it-yourself customers and professional installers.At December 31, 2009, it has operated approx 3,421 stores in 38 states. The company's stores carry an extensive product line, including new and remanufactured automotive hard parts, and truck accessories and a complete line of auto body paint and related materials, automotive tools and professional service equipment. The company's merchandise generally consists of nationally recognized, well-advertised, premium name brand products. In addition to name brand products, its stores carry a variety of high-quality private label products under its O'Reilly Auto Parts(r) and other proprietary name brands. Its merchandise generally consists of nationally recognized, well-advertised, premium name brand products such as AC Delco, Armor All, BWD, Cardone, Castrol, Federal Mogul, Gates Rubber, Monroe, Moog, Pennzoil, Prestone, Quaker State, STP, Turtle Wax, Valvoline, Wagner, and Wix. In addition to name brand products, our stores carry a wide variety of high-quality private label products under our BestTest®, BrakeBest®, Master Pro®, Micro-Gard®, Murray and Omnispark®, O’Reilly Auto Parts®, Power Torque®, Super Start®, and Ultima® proprietary name brands. The company aggressively promote sales to DIY customers through an integrated marketing program, which includes television, radio, direct mail, and newspaper advertising, in-store and online promotions, and sports and event sponsorships. The company utilizes a combination of brand and product/price messaging to drive retail traffic and purchases, frequently in connection with key sales events. It competes mainly with AutoZone, Inc., Advance Auto Parts, NAPA, CARQUEST, Wal-Mart Stores, Inc. and the Pep Boys- Manny, Moe and Jack, Inc. The Company competes in both the DIY and professional installer portions of the automotive aftermarket.
©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 1 of 6
Morningstar StockResearch Data Sheet Morningstar®Equity
Pricing data thru Dec. 28, 2010
O’Reilly Automotive, Inc. ORLY
Sales USD Mil Mkt Cap USD Mil Industry
Sector
5,261
8,468
Consumer Services
Fair Value
Uncertainty
Founded in 1957, O'Reilly Automotive is one of the largest Founded in 1957, O’Reilly Automotive is one of the largest specialty retailers of automotive aftermarket parts, tools, specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States. supplies, equipment, and accessories in the United States. As of As of June 2010, the firm operated 3,500 stores in 38 states June 2010, the firm operated 3,500 stores in 38 states serving both do-it-yourself customers and professional serving both installers. do-it-yourself customers and professional installers.
Morningstar Rating
Last Price
-QQ
13.63 4.13
19.22 7.75
-
60.64
18.63 12.05
22.45 11.46
32.53 21.98
Economic Moat
38.84 30.43
TM
Stewardship Grade
-None
Medium 38.30 27.49
Fiscal year-end: December
Specialty Retail
-
45.00 23.54 18.03
Rating updated as of Dec. 28, 2010
32.68 20.00
42.92 26.47
-
C per share prices in USD
63.05 37.47
Annual Price High Low Recent Splits
2:1
Price Volatility 39.0 19.0 9.0 4.0
233 South Patterson Employees: 44822 233 South Patterson Springfield, MO 65802 Springfield, 65802 Phone: 1 417MO 862-6708 Phone: 1 417 862-6708Website: http://www.oreillyauto.com Website: http://www.oreillyauto.com
Growth Rates Compound Annual Grade: B
Revenue % Operating Income % Earnings/Share % Dividends % Book Value/Share % Stock Total Return % +/- Industry +/- Market
3 Yr
5 Yr
10 Yr
35.5 60.2 50.7 . 15.2 58.2 37.8 46.6
28.5 23.9 12.9 . 17.6 23.1 17.7 28.3
23.0 23.1 16.1 . 17.9 13.5 10.5 13.5
20.4 21.5 17.1 . 15.3 21.9 10.3 23.0
Current
5 Yr Avg
Return on Equity % 13.6 Return on Assets % 8.0 Fixed Asset Turns 3.0 Inventory Turns 1.4 Revenue/Employee USD K 117.4 Gross Margin % Operating Margin % Net Margin % Free Cash Flow/Rev % R&D/Rev %
48.5 12.8 7.3 4.1 .
Trading Volume Million
24.4 34.5 -33.5 . 1375
2001
2002
36.3 49.3 49.4 . 1917
2003
-30.7 -7.3 -98.4 . 1348
52.5 26.1 27.7 . 2093
2004
2005
2006
2007
2008
2009
YTD
Stock Performance
16.8 7.8 23.8 . 2487
42.1 39.1 47.5 . 3588
0.2 -13.4 -5.0 . 3643
1.1 -2.4 43.4 . 3732
-5.2 33.3 -72.6 . 4135
24.0 0.6 1.3 . 5240
59.1 46.2 36.4 0.0 8468
Total Return % +/- Market +/- Industry Dividend Yield % Market Cap USD Mil
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
TTM
Financials
890 45.8 90 10.1
1092 42.8 114 10.4
1312 42.2 138 10.5
1512 42.2 165 10.9
1721 43.2 190 11.1
2045 43.6 253 12.3
2283 44.1 282 12.4
2522 44.4 305 12.1
3577 45.5 336 9.4
4847 48.0 538 11.1
5261 48.5 674 12.8
Revenue USD Mil Gross Margin % Oper Income USD Mil Operating Margin % Net Income USD Mil
Ind
Mkt
52
66
82
100
140
164
178
194
186
308
386
22.1 8.5 7.2 13.9 876.8
0.50 . 103 4.51
0.63 . 106 5.29
0.77 . 107 6.10
0.92 . 109 7.22
1.26 . 111 8.58
1.45 . 113 10.22
1.55 . 115 12.00
1.67 . 116 13.84
1.48 . 125 16.97
2.23 . 138 19.54
2.74 . 140 22.02
45.1 11.5 7.0 . .
31.3 5.0 2.0 6.4 .
39.8 14.3 9.6 0.1 10.0
6 -82 -76
50 -69 -18
105 -102 2
173 -137 36
227 -173 53
213 -205 8
186 -229 -43
299 -283 17
299 -342 -43
285 -415 -130
589 -374 215
Oper Cash Flow USD Mil Cap Spending USD Mil Free Cash Flow USD Mil
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
TTM
Profitability
7.8 11.9 5.8 1.34 1.5
8.4 13.0 6.1 1.39 1.5
8.8 13.6 6.2 1.41 1.6
9.1 13.9 6.6 1.38 1.5
10.7 16.1 8.1 1.31 1.5
10.4 15.7 8.0 1.30 1.5
9.7 14.2 7.8 1.24 1.5
9.1 13.1 7.7 1.18 1.4
5.8 9.6 5.2 1.11 1.8
6.8 12.4 6.3 1.08 1.8
8.0 13.6 7.3 1.08 1.6
Return on Assets % Return on Equity % Net Margin % Asset Turnover Financial Leverage
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
09-10
Financial Health
296 90 464 0.20
430 166 556 0.30
484 190 651 0.29
442 121 784 0.15
480 100 948 0.11
425 25 1146 0.02
567 110 1364 0.08
573 75 1592 0.05
822 725 2282 0.32
995 684 2686 0.25
926 327 3074 0.11
Working Capital USD Mil Long-Term Debt USD Mil Total Equity USD Mil Debt/Equity
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
TTM
Valuation
26.7 . 1.6 3.0 .
29.0 . 1.8 3.5 38.5
16.5 . 1.0 2.1 13.0
21.0 . 1.4 2.7 12.2
21.4 . 1.5 2.6 11.1
22.1 . 1.8 3.1 16.9
20.7 . 1.6 2.7 19.8
19.4 . 1.5 2.3 12.6
20.8 . 1.1 1.8 12.9
17.1 1.0 1.1 2.0 18.4
22.1 1.4 1.6 2.8 14.5
Price/Earnings P/E vs. Market Price/Sales Price/Book Price/Cash Flow
12-09 USD Mil
09-10 USD Mil
27 1913 171 2227
43 1998 194 2310
Fixed Assets Intangibles Total Assets
1726 744 4781
1892 744 5023
Payables Short-Term Debt Current Liabilities Long-Term Debt Total Liabilities
826 107 1231 684 2096
998 105 1383 327 1949
Total Equity
2686
3074
Valuation Analysis
Quarterly Results Current
5 Yr Avg
Ind
Mkt
22.1 17.5 14.5 39.7 . 2.8 1.6 1.0
20.0 . 16.1 . . 2.4 1.4 .
26.3 . 14.1 20.4 0.3 3.9 1.0 .
15.9 14.8 8.3 16.6 1.8 2.2 1.3 1.6
*3Yr Avg data is displayed in place of 5Yr Avg
Bear-Market Rank 3 (10=worst)
. . . . .
Cash Inventories Receivables Current Assets
Price/Earnings Forward P/E Price/Cash Flow Price/Free Cash Flow Dividend Yield % Price/Book Price/Sales PEG Ratio
10 Year High/Low 63.05 - 4.13
13.0 8.4 2.9 1.6 101.0 *
Financial Position Grade: A
52 week High/Low 63.05 - 37.47
1.0
2000
1 Yr
Profitability Analysis Grade: C
1.0
Monthly High/Low Rel Strength to S&P 500
Revenue USD Mil
Most Recent Period Prior Year Period Rev Growth %
Most Recent Period Prior Year Period Earnings Per Share USD
Most Recent Period Prior Year Period
Earnings Per Share USD Dividends USD Shares Mil Book Value Per Share USD
Industry Peers by Market Cap Dec 09
Mar 10
Jun 10
Sep 10
1173.7 1280.1 1381.2 1425.9 1114.6 1163.8 1251.4 1258.2 Dec 09
Mar 10
Jun 10
Sep 10
5.3 84.5
10.0 80.1
10.4 77.6
13.3 13.2
Dec 09
Mar 10
Jun 10
Sep 10
0.52 0.30
0.70 0.46
0.71 0.62
0.82 0.63
Mkt Cap USD Mil Rev USD Mil
O’Reilly Automotive, AutoZone, Inc. Genuine Parts Compan
8468 11932 8080
P/E
ROE%
5261 22.1 7565 17.1 10871 17.9
13.6 . 17.0
Major Fund Holders % of shares
T. Rowe Price New Horizons T. Rowe Price Mid-Cap Growth CGM Focus
2.27 2.27 2.17
TTM data based on rolling quarterly data if available; otherwise most recent annual data shown.
© 2010 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
®
ß
Morningstar Equity Research
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Management & Ownership Management Activity
Name
Position
LAWRENCE P. O'REILLY ROSALIE O'REILLY WOOTEN DAVID E. O'REILLY CHARLES H. O'REILLY,JR TED F. WISE GREGORY L. HENSLEE JEFF SHAW JAY D. BURCHFIELD MIKE SWEARENGIN
Director Director
Shares Held
779,398 705,456
Report Date*
30 Nov 2010 03 Dec 2010
InsiderActivity
15,000 20,000
Director Director President/COO CEO/President Divisional Senior VP Director Divisional Senior VP
485,292 170,918 141,452 36,703 23,386 7,683 5,078
01 Dec 2010 30 Nov 2010 28 Oct 2010 28 Oct 2010 04 Nov 2010 02 Nov 2010 02 Nov 2010
200,000 11,000 20,000 35,791 5,000 10,000 60,000
*Report date represents the date on which the owner's common shares held was audited.
Fund Ownership Top Owners
Morningstar Rating
% of Shares Held
% of Fund Assets
Change (k)
Portfolio Date
T. Rowe Price Mid-Cap Growth T. Rowe Price New Horizons T. Rowe Price Growth Stock CGM Focus Fidelity Contrafund
QQQQ QQQQ QQQQ QQ QQQQQ
2.27 2.21 1.98 2.19 1.16
0.94 2.60 0.65 5.38 0.13
0 -86 621 3,020 125
30 Sep 2010 30 Sep 2010 30 Sep 2010 30 Jun 2010 31 Oct 2010
QQQQQ
0.97 0.43 0.01 2.19
10.43 6.27 5.45 5.38
-130 0 2 3,020
30 Sep 2010 30 Sep 2010 31 Oct 2010 30 Jun 2010
Concentrated Holders
FBR Focus Investor Source Capital PowerShares Dynamic Retail CGM Focus
QQQQ QQ
Institutional Transactions Top 5 Buyers
Morningstar Rating
% of Shares Held
% of Fund Assets
Shares Bought/ Sold (k)
CGM Focus Brandywine Blue T. Rowe Price Growth Stock CGM Mutual American Century Ultra Inv
QQ QQ QQQQ QQQQQ QQQ
2.19 0.54 1.98 0.38 0.37
5.38 1.95 0.65 5.37 0.47
3,020 751 621 530 515
30 Jun 2010 30 Sep 2010 30 Sep 2010 30 Jun 2010 30 Sep 2010
QQQQ QQQQ QQQ QQQQ
0.42 0.33 0.19 0.24
0.16 0.59 0.76 2.77
-500 -267 -255 -148
30 Sep 2010 30 Sep 2010 30 Apr 2010 30 Sep 2010
Portfolio Date
Top 5 Sellers
VA CollegeAmerica Amcap 529F Munder Mid-Cap Core Growth Y Monks Waddell & Reed Small Cap A
©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 3 of 6
Morningstar Equity Research
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Industry Focus: Retail - Apparel & Specialty We Think Carter's Has Value in its Pockets 22 September 2010
Zoe Tan
Stock Analyst
Despite near-term headwinds, we think Carter's longterm prospects are bright.
In our view, Carter's CRI second-quarter miss, which was weighed down by several one-time factors, has provided investors with an attractive entry point. While we agree that rising input costs in the apparel industry will have a negative impact on near-term results, we believe Carter's should be able to weather these headwinds better than its peers, given its market-leading position in the space. Additionally, we are optimistic about Carter's long-term prospects, given its well-established relationship with retailers in the wholesale channel, a growing presence of its retail stores, and improving trends in the OshKosh brand. Therefore, we think an attractive buying opportunity will arise if Carter's stock falls below our Consider Buy price of $23.80, which implies forward fiscal-year price/earnings of 10 times, enterprise value/EBITDA of 5.2 times, and a free cash flow yield of 8.6%. We view weakness in Carter's second-quarter results as a one-time phenomenon.
At the end of July, Carter's announced second-quarter results that appeared to be loaded with bad news, including a deceleration in wholesale revenue growth, negative retail same-store sales and reduced floor space at Wal-Mart WMT . As a result, the stock has declined by about 10% since then (or about 26% since its peak in May this year). However, we believe the numbers are not as bad as they seem. Firstly, second-quarter sales were negatively impacted by the Easter holiday timing shift and earlier-thanexpected merchandise shipments to Wal-Mart in the prior quarter, which accounted for almost half of the 14.5% growth posted in the first quarter (see chart below). Additionally, weaker retail store traffic was largely driven by the lack of clearance inventories in the second quarter (total inventories were down 7% at the end of the first quarter), a period where retailers traditionally clear excess spring merchandise, given strong sell-through trends earlier this year. This is also evidenced by the healthy 160 basispoint gross margin expansion during the quarter. Further supporting our view that weakness in Carter's secondquarter sales is more of a one-time phenomenon, the firm has already secured incremental orders for both Carter's and OshKosh in the wholesale channel for the rest of the year and into spring 2011, which will likely translate to highsingle-digit revenue growth over the next few quarters.
Higher sourcing costs are a real near-term threat, but we expect thatnbsp;Carter's will hold up better relative to its peers.
The price of cotton, which is a primary component of kids' apparel (80% of Carter's merchandise is cotton-based), has increased by 40%-50% in recent months to $0.90 per pound in July 2010. Furthermore, the price of shipping a 40-foot dry container from China to the U.S. has increased substantially to $2,800 in August 2010, representing a 94% increase from the $1,400 paid in August 2009. Therefore, we project that higher sourcing costs will weigh on Carter's ©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 4 of 6
Morningstar Equity Research
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Industry Focus: Retail - Apparel & Specialty margins in the near term. However, we believe Carter's leadership in the children's apparel space will allow it to pass on a fraction of these price increases on staple items such as baby and sleepwear products. In our view, privatelabel brands, which face similar cost pressure, will likely follow suit, maintaining a 10% pricing gap to branded products. Therefore, we remain confident that Carter's can maintain a low-double-digit operating margin in 2011, with margins recovering to the 12% range over the next few years as consumer spending improves. Carter's well-established brand name in the kids' apparel space should drive long-term growth.
The namesake Carter's concept has become one of the major brands in the kids' apparel space, as its value-priced positioning and quality merchandise resonated well with consumers. Over the past decade, Carter's market share grew to 10% in 2009, up from 6% in 1998, which is an incredible feat, in our view, given the emergence of many private label names over the past decade (private label sales in the children's apparel market more than doubled over the past 10 years to 42% in 2009). Additionally, Carter’s has made itself a preferred partner of large national retailers such as J.C. Penney's JCP , Kohl's KSS , and Macy's
M , by being a store traffic driver through consistent adspending and attractive in-store displays. In fact, J.C. Penney's CEO Mike Ullmen, specifically pointed out that "increasing sales of select national brands with great brand loyalty like Carter's have really moved the needle in establishing J.C. Penney's as a destination for mums" during the firm's second-quarter conference call. Therefore, we remain confident that Carter's wholesale business will continue to be a steady revenue generator for the firm. In the mass channel, however, Carter's was faced with floor space reductions at Wal-Mart over the past two years, following the mass merchant's decision to downsize its branded apparel offerings. Nonetheless, this strategy seemed to have back-fired, and Wal-Mart has decided to bring back higher-quality brands into its stores. With a new apparel team at Wal-Mart, Carter's management forecasts that future orders will probably be more predictable and projects incremental orders following the successful door test earlier this year. Carter's expects to ship approximately $8 million to $10 million of incremental volume to the mass merchant in the back half of the year, and another 10% increase in mass channel sales in 2011, based on current orders. We see potential upside in the OshKosh segment.
After acquiring the struggling OshKosh chain in 2005, the firm repositioned the concept into a more upscale and sophisticated children's apparel brand. However, this change did not resonate well with consumers, as not many are willing to pay a hefty premium for branded children's clothing, especially since kids outgrow them pretty quickly. Moreover, as the economy weakened in 2007, management swiftly adjusted OshKosh's brand positioning and lowered its average pricing as much as 20% in the wholesale channel and about 5% in its retail stores. In our view, this is similar to what the firm has done with the namesake Carter's chain in the earlier part of this decade, where prices are adjusted to just 10% above private-label products. During our call ©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 5 of 6
Morningstar Equity Research
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Industry Focus: Retail - Apparel & Specialty with CFO Richard Westenberger, he explained that this strategy has worked well, as consumers are willing to pay a buck or two more for better quality merchandise. Additionally, the sales volume increase has more than offset lower mark-ups, enabling the firm to grow operating margins to the low double digit range in recent years, up from the high single digits in the late 90s (see chart below). Therefore, we have reason to believe that OshKosh will follow a similar path, albeit at a slower pace, as it is faced with a more competitive market for slightly older kids. In fact, we believe the change has already started to resonate with consumers, as OshKosh's wholesale orders and samestore sales at retail stores has turned positive over the past two years.
©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 6 of 6
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Profile Pricing data through 28 Dec 2010
In addition to this comprehensive company profile, Morningstar offers in-depth analyst research and ratings on selected companies. For information about our full analyst coverage, please contact: Morningstar Equity Research +1 (312) 696-6869 [email protected]
Contents Company Profile
1
Company Data
2
Management & Ownership
3
Industry Focus
4
O’Reilly Automotive, Inc. was incorporated in 1957 as a corporation. It is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, selling its products to both do-it-yourself customers and professional installers.At December 31, 2009, it has operated approx 3,421 stores in 38 states. The company's stores carry an extensive product line, including new and remanufactured automotive hard parts, and truck accessories and a complete line of auto body paint and related materials, automotive tools and professional service equipment. The company's merchandise generally consists of nationally recognized, well-advertised, premium name brand products. In addition to name brand products, its stores carry a variety of high-quality private label products under its O'Reilly Auto Parts(r) and other proprietary name brands. Its merchandise generally consists of nationally recognized, well-advertised, premium name brand products such as AC Delco, Armor All, BWD, Cardone, Castrol, Federal Mogul, Gates Rubber, Monroe, Moog, Pennzoil, Prestone, Quaker State, STP, Turtle Wax, Valvoline, Wagner, and Wix. In addition to name brand products, our stores carry a wide variety of high-quality private label products under our BestTest®, BrakeBest®, Master Pro®, Micro-Gard®, Murray and Omnispark®, O’Reilly Auto Parts®, Power Torque®, Super Start®, and Ultima® proprietary name brands. The company aggressively promote sales to DIY customers through an integrated marketing program, which includes television, radio, direct mail, and newspaper advertising, in-store and online promotions, and sports and event sponsorships. The company utilizes a combination of brand and product/price messaging to drive retail traffic and purchases, frequently in connection with key sales events. It competes mainly with AutoZone, Inc., Advance Auto Parts, NAPA, CARQUEST, Wal-Mart Stores, Inc. and the Pep Boys- Manny, Moe and Jack, Inc. The Company competes in both the DIY and professional installer portions of the automotive aftermarket.
©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 1 of 6
Morningstar StockResearch Data Sheet Morningstar®Equity
Pricing data thru Dec. 28, 2010
O’Reilly Automotive, Inc. ORLY
Sales USD Mil Mkt Cap USD Mil Industry
Sector
5,261
8,468
Consumer Services
Fair Value
Uncertainty
Founded in 1957, O'Reilly Automotive is one of the largest Founded in 1957, O’Reilly Automotive is one of the largest specialty retailers of automotive aftermarket parts, tools, specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States. supplies, equipment, and accessories in the United States. As of As of June 2010, the firm operated 3,500 stores in 38 states June 2010, the firm operated 3,500 stores in 38 states serving both do-it-yourself customers and professional serving both installers. do-it-yourself customers and professional installers.
Morningstar Rating
Last Price
13.63 4.13
19.22 7.75
-
60.64
18.63 12.05
22.45 11.46
32.53 21.98
Economic Moat
38.84 30.43
TM
Stewardship Grade
-None
Medium 38.30 27.49
Fiscal year-end: December
Specialty Retail
-
45.00 23.54 18.03
Rating updated as of Dec. 28, 2010
32.68 20.00
42.92 26.47
-
C per share prices in USD
63.05 37.47
Annual Price High Low Recent Splits
2:1
Price Volatility 39.0 19.0 9.0 4.0
233 South Patterson Employees: 44822 233 South Patterson Springfield, MO 65802 Springfield, 65802 Phone: 1 417MO 862-6708 Phone: 1 417 862-6708Website: http://www.oreillyauto.com Website: http://www.oreillyauto.com
Growth Rates Compound Annual Grade: B
Revenue % Operating Income % Earnings/Share % Dividends % Book Value/Share % Stock Total Return % +/- Industry +/- Market
3 Yr
5 Yr
10 Yr
35.5 60.2 50.7 . 15.2 58.2 37.8 46.6
28.5 23.9 12.9 . 17.6 23.1 17.7 28.3
23.0 23.1 16.1 . 17.9 13.5 10.5 13.5
20.4 21.5 17.1 . 15.3 21.9 10.3 23.0
Current
5 Yr Avg
Return on Equity % 13.6 Return on Assets % 8.0 Fixed Asset Turns 3.0 Inventory Turns 1.4 Revenue/Employee USD K 117.4 Gross Margin % Operating Margin % Net Margin % Free Cash Flow/Rev % R&D/Rev %
48.5 12.8 7.3 4.1 .
Trading Volume Million
24.4 34.5 -33.5 . 1375
2001
2002
36.3 49.3 49.4 . 1917
2003
-30.7 -7.3 -98.4 . 1348
52.5 26.1 27.7 . 2093
2004
2005
2006
2007
2008
2009
YTD
Stock Performance
16.8 7.8 23.8 . 2487
42.1 39.1 47.5 . 3588
0.2 -13.4 -5.0 . 3643
1.1 -2.4 43.4 . 3732
-5.2 33.3 -72.6 . 4135
24.0 0.6 1.3 . 5240
59.1 46.2 36.4 0.0 8468
Total Return % +/- Market +/- Industry Dividend Yield % Market Cap USD Mil
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
TTM
Financials
890 45.8 90 10.1
1092 42.8 114 10.4
1312 42.2 138 10.5
1512 42.2 165 10.9
1721 43.2 190 11.1
2045 43.6 253 12.3
2283 44.1 282 12.4
2522 44.4 305 12.1
3577 45.5 336 9.4
4847 48.0 538 11.1
5261 48.5 674 12.8
Revenue USD Mil Gross Margin % Oper Income USD Mil Operating Margin % Net Income USD Mil
Ind
Mkt
52
66
82
100
140
164
178
194
186
308
386
22.1 8.5 7.2 13.9 876.8
0.50 . 103 4.51
0.63 . 106 5.29
0.77 . 107 6.10
0.92 . 109 7.22
1.26 . 111 8.58
1.45 . 113 10.22
1.55 . 115 12.00
1.67 . 116 13.84
1.48 . 125 16.97
2.23 . 138 19.54
2.74 . 140 22.02
45.1 11.5 7.0 . .
31.3 5.0 2.0 6.4 .
39.8 14.3 9.6 0.1 10.0
6 -82 -76
50 -69 -18
105 -102 2
173 -137 36
227 -173 53
213 -205 8
186 -229 -43
299 -283 17
299 -342 -43
285 -415 -130
589 -374 215
Oper Cash Flow USD Mil Cap Spending USD Mil Free Cash Flow USD Mil
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
TTM
Profitability
7.8 11.9 5.8 1.34 1.5
8.4 13.0 6.1 1.39 1.5
8.8 13.6 6.2 1.41 1.6
9.1 13.9 6.6 1.38 1.5
10.7 16.1 8.1 1.31 1.5
10.4 15.7 8.0 1.30 1.5
9.7 14.2 7.8 1.24 1.5
9.1 13.1 7.7 1.18 1.4
5.8 9.6 5.2 1.11 1.8
6.8 12.4 6.3 1.08 1.8
8.0 13.6 7.3 1.08 1.6
Return on Assets % Return on Equity % Net Margin % Asset Turnover Financial Leverage
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
09-10
Financial Health
296 90 464 0.20
430 166 556 0.30
484 190 651 0.29
442 121 784 0.15
480 100 948 0.11
425 25 1146 0.02
567 110 1364 0.08
573 75 1592 0.05
822 725 2282 0.32
995 684 2686 0.25
926 327 3074 0.11
Working Capital USD Mil Long-Term Debt USD Mil Total Equity USD Mil Debt/Equity
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
TTM
Valuation
26.7 . 1.6 3.0 .
29.0 . 1.8 3.5 38.5
16.5 . 1.0 2.1 13.0
21.0 . 1.4 2.7 12.2
21.4 . 1.5 2.6 11.1
22.1 . 1.8 3.1 16.9
20.7 . 1.6 2.7 19.8
19.4 . 1.5 2.3 12.6
20.8 . 1.1 1.8 12.9
17.1 1.0 1.1 2.0 18.4
22.1 1.4 1.6 2.8 14.5
Price/Earnings P/E vs. Market Price/Sales Price/Book Price/Cash Flow
12-09 USD Mil
09-10 USD Mil
27 1913 171 2227
43 1998 194 2310
Fixed Assets Intangibles Total Assets
1726 744 4781
1892 744 5023
Payables Short-Term Debt Current Liabilities Long-Term Debt Total Liabilities
826 107 1231 684 2096
998 105 1383 327 1949
Total Equity
2686
3074
Valuation Analysis
Quarterly Results Current
5 Yr Avg
Ind
Mkt
22.1 17.5 14.5 39.7 . 2.8 1.6 1.0
20.0 . 16.1 . . 2.4 1.4 .
26.3 . 14.1 20.4 0.3 3.9 1.0 .
15.9 14.8 8.3 16.6 1.8 2.2 1.3 1.6
*3Yr Avg data is displayed in place of 5Yr Avg
Bear-Market Rank 3 (10=worst)
. . . . .
Cash Inventories Receivables Current Assets
Price/Earnings Forward P/E Price/Cash Flow Price/Free Cash Flow Dividend Yield % Price/Book Price/Sales PEG Ratio
10 Year High/Low 63.05 - 4.13
13.0 8.4 2.9 1.6 101.0 *
Financial Position Grade: A
52 week High/Low 63.05 - 37.47
1.0
2000
1 Yr
Profitability Analysis Grade: C
1.0
Monthly High/Low Rel Strength to S&P 500
Revenue USD Mil
Most Recent Period Prior Year Period Rev Growth %
Most Recent Period Prior Year Period Earnings Per Share USD
Most Recent Period Prior Year Period
Earnings Per Share USD Dividends USD Shares Mil Book Value Per Share USD
Industry Peers by Market Cap Dec 09
Mar 10
Jun 10
Sep 10
1173.7 1280.1 1381.2 1425.9 1114.6 1163.8 1251.4 1258.2 Dec 09
Mar 10
Jun 10
Sep 10
5.3 84.5
10.0 80.1
10.4 77.6
13.3 13.2
Dec 09
Mar 10
Jun 10
Sep 10
0.52 0.30
0.70 0.46
0.71 0.62
0.82 0.63
Mkt Cap USD Mil Rev USD Mil
O’Reilly Automotive, AutoZone, Inc. Genuine Parts Compan
8468 11932 8080
P/E
ROE%
5261 22.1 7565 17.1 10871 17.9
13.6 . 17.0
Major Fund Holders % of shares
T. Rowe Price New Horizons T. Rowe Price Mid-Cap Growth CGM Focus
2.27 2.27 2.17
TTM data based on rolling quarterly data if available; otherwise most recent annual data shown.
© 2010 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
®
ß
Morningstar Equity Research
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Management & Ownership Management Activity
Name
Position
LAWRENCE P. O'REILLY ROSALIE O'REILLY WOOTEN DAVID E. O'REILLY CHARLES H. O'REILLY,JR TED F. WISE GREGORY L. HENSLEE JEFF SHAW JAY D. BURCHFIELD MIKE SWEARENGIN
Director Director
Shares Held
779,398 705,456
Report Date*
30 Nov 2010 03 Dec 2010
InsiderActivity
15,000 20,000
Director Director President/COO CEO/President Divisional Senior VP Director Divisional Senior VP
485,292 170,918 141,452 36,703 23,386 7,683 5,078
01 Dec 2010 30 Nov 2010 28 Oct 2010 28 Oct 2010 04 Nov 2010 02 Nov 2010 02 Nov 2010
200,000 11,000 20,000 35,791 5,000 10,000 60,000
*Report date represents the date on which the owner's common shares held was audited.
Fund Ownership Top Owners
Morningstar Rating
% of Shares Held
% of Fund Assets
Change (k)
Portfolio Date
T. Rowe Price Mid-Cap Growth T. Rowe Price New Horizons T. Rowe Price Growth Stock CGM Focus Fidelity Contrafund
QQQQ QQQQ QQQQ QQ QQQQQ
2.27 2.21 1.98 2.19 1.16
0.94 2.60 0.65 5.38 0.13
0 -86 621 3,020 125
30 Sep 2010 30 Sep 2010 30 Sep 2010 30 Jun 2010 31 Oct 2010
QQQQQ
0.97 0.43 0.01 2.19
10.43 6.27 5.45 5.38
-130 0 2 3,020
30 Sep 2010 30 Sep 2010 31 Oct 2010 30 Jun 2010
Concentrated Holders
FBR Focus Investor Source Capital PowerShares Dynamic Retail CGM Focus
QQQQ QQ
Institutional Transactions Top 5 Buyers
Morningstar Rating
% of Shares Held
% of Fund Assets
Shares Bought/ Sold (k)
CGM Focus Brandywine Blue T. Rowe Price Growth Stock CGM Mutual American Century Ultra Inv
QQ QQ QQQQ QQQQQ QQQ
2.19 0.54 1.98 0.38 0.37
5.38 1.95 0.65 5.37 0.47
3,020 751 621 530 515
30 Jun 2010 30 Sep 2010 30 Sep 2010 30 Jun 2010 30 Sep 2010
QQQQ QQQQ QQQ QQQQ
0.42 0.33 0.19 0.24
0.16 0.59 0.76 2.77
-500 -267 -255 -148
30 Sep 2010 30 Sep 2010 30 Apr 2010 30 Sep 2010
Portfolio Date
Top 5 Sellers
VA CollegeAmerica Amcap 529F Munder Mid-Cap Core Growth Y Monks Waddell & Reed Small Cap A
©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 3 of 6
Morningstar Equity Research
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Industry Focus: Retail - Apparel & Specialty We Think Carter's Has Value in its Pockets 22 September 2010
Zoe Tan
Stock Analyst
Despite near-term headwinds, we think Carter's longterm prospects are bright.
In our view, Carter's CRI second-quarter miss, which was weighed down by several one-time factors, has provided investors with an attractive entry point. While we agree that rising input costs in the apparel industry will have a negative impact on near-term results, we believe Carter's should be able to weather these headwinds better than its peers, given its market-leading position in the space. Additionally, we are optimistic about Carter's long-term prospects, given its well-established relationship with retailers in the wholesale channel, a growing presence of its retail stores, and improving trends in the OshKosh brand. Therefore, we think an attractive buying opportunity will arise if Carter's stock falls below our Consider Buy price of $23.80, which implies forward fiscal-year price/earnings of 10 times, enterprise value/EBITDA of 5.2 times, and a free cash flow yield of 8.6%. We view weakness in Carter's second-quarter results as a one-time phenomenon.
At the end of July, Carter's announced second-quarter results that appeared to be loaded with bad news, including a deceleration in wholesale revenue growth, negative retail same-store sales and reduced floor space at Wal-Mart WMT . As a result, the stock has declined by about 10% since then (or about 26% since its peak in May this year). However, we believe the numbers are not as bad as they seem. Firstly, second-quarter sales were negatively impacted by the Easter holiday timing shift and earlier-thanexpected merchandise shipments to Wal-Mart in the prior quarter, which accounted for almost half of the 14.5% growth posted in the first quarter (see chart below). Additionally, weaker retail store traffic was largely driven by the lack of clearance inventories in the second quarter (total inventories were down 7% at the end of the first quarter), a period where retailers traditionally clear excess spring merchandise, given strong sell-through trends earlier this year. This is also evidenced by the healthy 160 basispoint gross margin expansion during the quarter. Further supporting our view that weakness in Carter's secondquarter sales is more of a one-time phenomenon, the firm has already secured incremental orders for both Carter's and OshKosh in the wholesale channel for the rest of the year and into spring 2011, which will likely translate to highsingle-digit revenue growth over the next few quarters.
Higher sourcing costs are a real near-term threat, but we expect thatnbsp;Carter's will hold up better relative to its peers.
The price of cotton, which is a primary component of kids' apparel (80% of Carter's merchandise is cotton-based), has increased by 40%-50% in recent months to $0.90 per pound in July 2010. Furthermore, the price of shipping a 40-foot dry container from China to the U.S. has increased substantially to $2,800 in August 2010, representing a 94% increase from the $1,400 paid in August 2009. Therefore, we project that higher sourcing costs will weigh on Carter's ©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 4 of 6
Morningstar Equity Research
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Industry Focus: Retail - Apparel & Specialty margins in the near term. However, we believe Carter's leadership in the children's apparel space will allow it to pass on a fraction of these price increases on staple items such as baby and sleepwear products. In our view, privatelabel brands, which face similar cost pressure, will likely follow suit, maintaining a 10% pricing gap to branded products. Therefore, we remain confident that Carter's can maintain a low-double-digit operating margin in 2011, with margins recovering to the 12% range over the next few years as consumer spending improves. Carter's well-established brand name in the kids' apparel space should drive long-term growth.
The namesake Carter's concept has become one of the major brands in the kids' apparel space, as its value-priced positioning and quality merchandise resonated well with consumers. Over the past decade, Carter's market share grew to 10% in 2009, up from 6% in 1998, which is an incredible feat, in our view, given the emergence of many private label names over the past decade (private label sales in the children's apparel market more than doubled over the past 10 years to 42% in 2009). Additionally, Carter’s has made itself a preferred partner of large national retailers such as J.C. Penney's JCP , Kohl's KSS , and Macy's
M , by being a store traffic driver through consistent adspending and attractive in-store displays. In fact, J.C. Penney's CEO Mike Ullmen, specifically pointed out that "increasing sales of select national brands with great brand loyalty like Carter's have really moved the needle in establishing J.C. Penney's as a destination for mums" during the firm's second-quarter conference call. Therefore, we remain confident that Carter's wholesale business will continue to be a steady revenue generator for the firm. In the mass channel, however, Carter's was faced with floor space reductions at Wal-Mart over the past two years, following the mass merchant's decision to downsize its branded apparel offerings. Nonetheless, this strategy seemed to have back-fired, and Wal-Mart has decided to bring back higher-quality brands into its stores. With a new apparel team at Wal-Mart, Carter's management forecasts that future orders will probably be more predictable and projects incremental orders following the successful door test earlier this year. Carter's expects to ship approximately $8 million to $10 million of incremental volume to the mass merchant in the back half of the year, and another 10% increase in mass channel sales in 2011, based on current orders. We see potential upside in the OshKosh segment.
After acquiring the struggling OshKosh chain in 2005, the firm repositioned the concept into a more upscale and sophisticated children's apparel brand. However, this change did not resonate well with consumers, as not many are willing to pay a hefty premium for branded children's clothing, especially since kids outgrow them pretty quickly. Moreover, as the economy weakened in 2007, management swiftly adjusted OshKosh's brand positioning and lowered its average pricing as much as 20% in the wholesale channel and about 5% in its retail stores. In our view, this is similar to what the firm has done with the namesake Carter's chain in the earlier part of this decade, where prices are adjusted to just 10% above private-label products. During our call ©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 5 of 6
Morningstar Equity Research
O'Reilly Automotive, Inc. ORLY (NAS) Last Close
Industry
Sector
60.64
Specialty Retail
Consumer Services
USD
Industry Focus: Retail - Apparel & Specialty with CFO Richard Westenberger, he explained that this strategy has worked well, as consumers are willing to pay a buck or two more for better quality merchandise. Additionally, the sales volume increase has more than offset lower mark-ups, enabling the firm to grow operating margins to the low double digit range in recent years, up from the high single digits in the late 90s (see chart below). Therefore, we have reason to believe that OshKosh will follow a similar path, albeit at a slower pace, as it is faced with a more competitive market for slightly older kids. In fact, we believe the change has already started to resonate with consumers, as OshKosh's wholesale orders and samestore sales at retail stores has turned positive over the past two years.
©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Page 6 of 6
