The bad economy has been a boon for do-it-yourself auto parts repair companies such as AutoZone (AZO 1.06%) and O'Reilly Automotive (ORLY 0.94%). Both of them are continually finding new ways to appeal to customers while finding new locations to set up shop, and shareholders have been awarded with record-high stock prices.
O'Reilly Automotive and AutoZone both have market caps around $18 billion, but one looks a bit more attractive than the other.
Image source: Getty Images.
Taking a look under the hood
For the quarter ended Aug. 30, AutoZone reported a 4.5% increase in calendar-adjusted sales to $3.0 billion. Same-store sales rose 1.5%. Net income jumped 7.4% to $374 million, while diluted earnings per share jumped 16% to $11.28 partly due to the effect of stock buybacks.
For O'Reilly Automotive, percentage growth in the most recent quarter was more pronounced. Sales leaped 9% to $1.88 billion. Same-store sales rose 6.2%. Net income climbed 16% to $217 million while diluted earnings per share shot up 22% to $2.06, again partly from the effect of buybacks.
AutoZone is the bigger company, with 5,391 stores, while O'Reilly ended the quarter with 4,311 stores. It's not a monster difference, which means AutoZone is doing much better in sales and net income on a per-unit basis, while O'Reilly's faster growth suggests it may be gaining a bit of market share at AutoZone's expense.
Aiming for excellent customer service
CEO Bill Rhodes of AutoZone explained the results in the company press release were due to providing "exceptional customer service and trustworthy advice."
Similarly, CEO Greg Henslee of O'Reilly stated in his company's press release an "unwavering commitment to providingexcellent customer service."
This type of focus from management and message delivered may help set each chain apart from smaller chains and mom and pops but not necessarily as much from each other.
Both companies are growing in the neighborhood of 200 new locations per year and in the most recent quarter AutoZone notched roughly 27% more in per-unit sales than O'Reilly.This means O'Reilly's game of catch-up is more focused on same-store sales gains, but it would seem it still has a way to go just to be on par with AutoZone. Both companies sport gross profit margins close to 50%, so the race is really all about sales.
How different can retail auto parts companies be?
One thing that differentiates the two companies is where they are expanding. Both are expanding in the United States, but only AutoZone is expanding internationally as well. For example, in the recent quarter it opened its 400thlocation in Mexico, where O'Reilly doesn't have a presence and no current opportunity to take market share there. Autozone also has five stores in Brazil.
During the recent conference call and without offering details, AutoZone execs remarked that its Mexico stores "continue to perform well" with returns and profit growth in line with company expectations. The company expects ample unit growth opportunities internationally as well as domestically..
All in all, AutoZone trades with a lower P/E than O'Reilly yet what appears to be the same or better growth prospects. They're both growing units at around the same number annually, but the market is therefore pricing O'Reilly to grow significantly big enough to match AutoZone on per-unit sales. Both are great companies, but I lean more toward AutoZone as the better buy since they both have similar market caps yet AutoZone has less speculation built in or needed in its stock price.
Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Ford and Tesla Motors. The Motley Fool owns shares of Ford, O'Reilly Automotive, and Tesla Motors. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
FAQs
All in all, AutoZone trades with a lower P/E than O'Reilly yet what appears to be the same or better growth prospects. They're both growing units at around the same number annually, but the market is therefore pricing O'Reilly to grow significantly big enough to match AutoZone on per-unit sales.
Is O Reilly's a good stock to buy? ›
What do analysts say about O'Reilly Auto? O'Reilly Auto's analyst rating consensus is a Strong Buy. This is based on the ratings of 13 Wall Streets Analysts.
Is AutoZone stock a good buy? ›
The average price target represents 6.33% Increase from the current price of $3,008.23. AutoZone's analyst rating consensus is a Strong Buy. This is based on the ratings of 18 Wall Streets Analysts.
Is AutoZone recession proof? ›
The ability to grow sales in one of the greatest recessions reinforces why AutoZone is one of the best blue-chip stocks to hold. Today, it operates 6,300 stores in the U.S., 740 in Mexico and 100 in Brazil.
Why did AutoZone stock go down? ›
AutoZone Inc. shares fell as its drive to expand its commercial business hit a snag, with a rainy start to spring and a pullback in consumer spending hurting sales.
Does O Reilly stock pay dividends? ›
O'Reilly Auto (DE:OM6) does not pay a dividend. When is O'Reilly Auto dividend payment date? O'Reilly Auto (DE:OM6) does not pay a dividend.
Why is O'Reilly stock so high? ›
The bump higher came after the company's earning per share growth rate edged up every quarter over the past year. O'Reilly stock rose Wednesday afternoon. That slow, steady rise in earnings also gives Springfield, Mo. -based O'Reilly a near-best 96 Earnings Per Share Rating out of 99.
What are the disadvantages of AutoZone? ›
Weaknesses. Dependence on Domestic Market: Despite its international presence, AutoZone still relies heavily on the U.S. market, which accounts for the majority of its sales. This concentration increases the company's vulnerability to domestic market risks, including economic downturns and regulatory changes.
Which industry is most recession proof? ›
Historically, the industries considered to be the most defensive and better placed to fare reasonably during recessions are utilities, health care, and consumer staples.
Is AutoZone in debt? ›
AutoZone long term debt for 2022 was $6.122B, a 16.17% increase from 2021. AutoZone long term debt for 2021 was $5.27B, a 4.42% decline from 2020.
In June 2019 AutoZone entered into an $11 million settlement against with the State of California to resolve allegations that the company had violated state laws governing hazardous waste, hazardous materials, and confidential consumer information.
Does AutoZone stock pay dividends? ›
Does AutoZone pay dividends? No. As a growth company, AutoZone plans to reinvest in the company for the near term instead of offering dividend payments.
Who owns the most AutoZone stock? ›
Autozone Stock Ownership FAQ
Autozone (NYSE: AZO) is owned by 91.71% institutional shareholders, 340.34% Autozone insiders, and 0.00% retail investors. Edward S. Lampert is the largest individual Autozone shareholder, owning 48.87M shares representing 286.06% of the company.
What is Oreillys stock price forecast for 2025? ›
On average, Wall Street analysts predict that O Reilly Automotive's share price could reach $1,158.10 by May 14, 2025. The average O Reilly Automotive stock price prediction forecasts a potential upside of 9.6% from the current ORLY share price of $1,056.65.
What is O Reilly target price? ›
Stock Price Targets
| High | $1,275.00 |
|---|
| Median | $1,200.00 |
| Low | $930.00 |
| Average | $1,168.26 |
| Current Price | $1,080.57 |
quote is equal to 1007.280 USD at 2024-06-15. Based on our forecasts, a long-term increase is expected, the "ORLY" stock price prognosis for 2029-06-06 is 1864.487 USD. With a 5-year investment, the revenue is expected to be around +85.1%. Your current $100 investment may be up to $185.1 in 2029.
What is the target price for Gamb stock? ›
The average price target for Gambling.com is $13.00. This is based on 7 Wall Streets Analysts 12-month price targets, issued in the past 3 months. The highest analyst price target is $18.00 ,the lowest forecast is $10.00.
