O’Reilly Automotive Inc. today announced record revenues and earnings for its third quarter ended Sept. 30, 2016. The company also announced it has entered into a definitive agreement to purchase Bond Auto Parts. The purchase is expected to be complete before the end of this year.
Third quarter financial results
Sales for the third quarter increased $141 million, or 7 percent, to $2.22 billion from $2.08 billion for the same period one year ago. Gross profit for the third quarter increased to $1.17 billion (or 52.7 percent of sales) from $1.09 billion (or 52.4 percent of sales) for the same period one year ago, representing an increase of 7 percent. Operating income for the third quarter increased to $448 million (or 20.2 percent of sales) from $415 million (or 20 percent of sales) for the same period one year ago, representing an increase of 8 percent.
Net income for the third quarter increased $12 million, or 5 percent, to $278 million (or 12.5 percent of sales) from $266 million (or 12.8 percent of sales) for the same period one year ago. Diluted earnings per common share for the third quarter increased 10 percent to $2.90 on 96 million shares versus $2.64 on 101 million shares for the same period one year ago.
O’Reilly President and CEO Greg Henslee commented, “We are proud to report another very profitable quarter, highlighted by a record 20.2 percent operating margin and a comparable store sales increase of 4.2 percent, which was on top of our very strong 7.9 percent comparable store sales results from our third quarter last year. Team O’Reilly’s relentless focus on providing consistent, excellent customer service drove our top-line performance, and our unwavering commitment to profitable growth translated this growth into third quarter diluted earnings per share of $2.90, which exceeded the top end of our guidance for the quarter. As a reminder, our third quarter 2015 diluted earnings per share results of $2.64 included a larger than typical tax benefit of approximately 11 cents from the resolution of certain historical tax positions. I would like to take this opportunity to thank each of our over 74,000 team members for their continued hard work and dedication to providing unsurpassed levels of service to our customers and for their many contributions to our ongoing success.”
Henslee continued, “We are also very excited to announce we have entered into a definitive agreement to purchase substantially all of the assets of Bond Auto Parts, a privately held automotive parts supplier, which operates 48 stores in Vermont, New Hampshire, Massachusetts and New York. Over the past 60 years, the Bond family has built a very successful business based on a culture of providing excellent customer service, which makes their company a perfect fit with O’Reilly. I would like to welcome the Bond team members to O’Reilly, and we look forward to the opportunities ahead of us as we continue our growth in the Northeast.”
Craig Bond, president, Auto Parts Warehouse (Bond Warehouse Division), stated, “The history of Bond Auto is very similar to that of O’Reilly. My grandfather, F. Earl Bond, began Bond Auto Parts as a one-store operation in 1956 and [it] has remained a family-owned and operated company for the past 60 years. Both Bond and O’Reilly were members of the Aftermarket Auto Parts Alliance buying group for many years and formed a strong working relationship that has lasted through to today. Throughout the years, Bond has emulated O’Reilly and today’s announcement brings these two great companies together.”
The transaction is expected to close by the end of this year.
Year-to-date financial results
Sales for the first nine months of 2016 increased $476 million, or 8 percent, to $6.49 billion from $6.02 billion for the same period one year ago. Gross profit for the first nine months of 2016 increased to $3.39 billion (or 52.3 percent of sales) from $3.14 billion (or 52.1 percent of sales) for the same period one year ago, representing an increase of 8 percent. Operating income for the first nine months of 2016 increased to $1.29 billion (or 19.9 percent of sales) from $1.15 billion (or 19.1 percent of sales) for the same period one year ago, representing an increase of 12 percent.
Net income for the first nine months of 2016 increased $79 million, or 11 percent, to $792 million (or 12.2 percent of sales) from $713 million (or 11.8 percent of sales) for the same period one year ago. Diluted earnings per common share for the first nine months of 2016 increased 17 percent to $8.14 on 97 million shares versus $6.98 on 102 million shares for the same period one year ago.
Henslee added, “During the third quarter, we opened 52 new stores, which brings our year-to-date store openings to 141 net, new stores across 35 different states, with a focus on our strong growth markets of Texas, Florida and the Northeast, and we are on pace to achieve our target of 210 net, new store openings in 2016. Additionally, I am pleased to announce that during the third quarter, we opened two stores in Rhode Island, which represents expansion into our 45th state. We plan to continue our profitable store growth in 2017, and we are establishing a target of 190 net, new store openings for next year, which is slightly below our typical new store target in light of the resources we will devote to converting the 48 Bond stores.”
Share repurchase program
During the third quarter, the company repurchased 0.4 million shares of its common stock, at an average price per share of $281.04, for a total investment of $103 million. During the first nine months of 2016, the company repurchased 3.7 million shares of its common stock, at an average price per share of $261.32, for a total investment of $960 million. Subsequent to the end of the third quarter and through the date of this release, the company repurchased an additional 0.3 million shares of its common stock, at an average price per share of $276.58, for a total investment of $71 million. O’Reilly has repurchased a total of 55.2 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through the date of this release, at an average price of $115.76, for a total aggregate investment of $6.39 billion. As of the date of this release, the company had approximately $613 million remaining under its current share repurchase authorization.
