O’Reilly Earnings: Strong Start to Year as Professional Segment Spurs Sales; Shares Rich

Our $670 per share valuation of narrow-moat O'Reilly should not change much after the company announced a strong start to 2023, with first-quarter comparable sales rising nearly 11%. The professional segment drove growth, with sales up more than 20% as the company capitalized on its superior distribution architecture and part availability. The quarter reinforces our view that O'Reilly leads an industry fairly insulated from economic turbulence, and our long-term forecast (mid-single-digit percentage annual sales growth and low-20s adjusted operating margins) is intact. Despite our favorable view, we suggest investors await a more attractive entry point as the shares' current trading price affords little room for error.