May 20, 2009 - O'Reilly Automotive, Inc. (ORLY-NASDAQ) operates as a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States. Its stores offer new and remanufactured automotive hard parts, including alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, chassis parts, and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives, and appearance products; accessories, such as floor mats, seat covers, and truck accessories;and a line of auto body paint and related materials, automotive tools,and professional service equipment.

We all know the auto industry is in chaos. That could well work in O'Reilly's favor. As Chrysler goes through bankruptcy and GM seems about to, car owners will still need to have their cars serviced or repaired. Most will try to find a qualified mechanic, but many will work on their own cars, maintaining or fixing them as required. Either way, professional mechanics or do-it-yourselfers will use O'Reilly shops for parts.

During the 4th quarter of last year, sales were up 6% compared to the same quarter in 2007. That's in spite of the difficult economic environment. Total revenues reached $1.1 billion which included the recent purchase of CSK. CSK was bought in 2008 and gave the company 12 new states of business, mostly in the Midwest and West. The company is still digesting the acquisition and incurring some one-time costs such as changing the names on the 4 brands that CSK sold under. Also, many of the CSK units have higher operating costs which could affect margins for a while.

There's a lot of good news for O'Reilly, and investors have heard it. Last fall, the stock went to $20 a share. Now it's 80% higher, trading at near its all-time high of $40.50 hit on April 30 of this year. Of course, the reason for the enthusiasm is increasing earnings.

In 2006, they were $1.55 a share, then in 2007, $1.67. In 2008, with the acquisition costs of CSK, earnings were lower, at $1.64. This year, 18 analysts covering the stock show a consensus of $1.95 with a range of $1.84 to $2.05. Next year, the consensus is for $2.38 with a range of $2.02 to $2.75. The company seems to be benefitting from the economic slowdown. So the question is: what happens if the economy recovers? No one knows, but the best guess is that the numbers won't be too much different.

Sales have been consistently higher, starting in 2006 at $2.283 billion, then $2.522 billion, followed by $3.576 billion, thanks to the addition of CSK's revenues. This year, analysts predict $4.77 billion and next year $5.10 billion.

More numbers: Market cap is $4.94 billion. Forward P/E is 15.3. Price to Book is 2.15. Operating margin is 9.15% while Profit margin is 4.95%. Total cash is $37.4 million. Total debt is $791 million, about 24% of capital. Current ratio is 1.8. Book Value is $17.47. Insiders own 4.21% of the 135.66 million shares outstanding. Institutions have 92% of them. There is no dividend.

O'Reilly Automotive is a good stock with a lot going for it. Investors believe the story, have bought the stock. After the recent run up, it would be wise to simply watch this stock to see if there will be an opportunity to buy at a better level if further due diligence suggests it's right for you. While future earnings look good, the stock seems to already reflect those numbers.

Company Web site: www.oreillyauto.com

- Ted Allrich