O’Reilly Earnings: Strong Performance Continues, but Shares Are Priced for Perfection

We expect little change to our fair value estimate of $680 per share for narrow-moat O’Reilly after it announced second-quarter results highlighted by continued strong performance. Same-store sales were up 9%, slightly slower than the first quarter’s 11% growth but still much faster than the roughly 4% in the year-ago quarter. As was the case in the first quarter, the company saw double-digit growth in the professional segment, which we believe reflects its superior distribution apparatus and the industry’s insulation from macroeconomic volatility. Shares were down about 4% after the earnings release, which we think reflects the sky-high expectations the market has placed on O’Reilly. Thus, despite our view that it’s the best-positioned national retailer with its robust dual-market approach, shares are priced for perfection and look overvalued to us.