O’Reilly Automotive has announced record revenues and earnings for its fourth quarter and full year ended Dec. 31, 2018. The results represent 26 consecutive years of comparable store sales growth and record revenue and operating income for O’Reilly since becoming a public company in April of 1993.
Greg Johnson, O’Reilly’s CEO and co-president, commented, “We are pleased to once again report another profitable quarter and a solid finish to 2018. Team O’Reilly’s commitment to excellent customer service drove a 3.3 percent increase in fourth quarter comparable store sales, which was above the mid-point of our guidance range. Our solid top-line performance, combined with our relentless focus on profitable growth, resulted in a 6 percent increase in operating profit dollars for the fourth quarter. As a reminder, our fourth quarter 2017 results included a one-time 62-cent benefit to diluted earnings per share from the revaluation of the company’s deferred income tax liabilities due to the enactment of the U.S. Tax Cuts and Jobs Act in December of 2017, and we were still able to drive a 6 percent increase in diluted earnings per share in the fourth quarter of 2018, despite this difficult comparison. Our continued growth is the direct result of Team O’Reilly’s dedication to providing unsurpassed levels of service to our customers, and I would like to thank our over 78,000 team members for their hard work and commitment to our long-term success.”
Sales for the fourth quarter increased $124 million, or 6 percent, to $2.31 billion from $2.19 billion for the same period one year ago. Gross profit for the fourth quarter increased to $1.23 billion (or 53.3 percent of sales) from $1.16 billion (or 52.9 percent of sales) for the same period one year ago, representing an increase of 6 percent.
Operating income for the fourth quarter increased to $428 million (or 18.5 percent of sales) from $403 million (or 18.4 percent of sales) for the same period one year ago, representing an increase of 6 percent.
Net income for the fourth quarter decreased $2 million, or 1 percent, to $300 million (or 13 percent of sales) from $302 million (or 13.8 percent of sales) for the same period one year ago. Diluted earnings per common share for the fourth quarter increased 6 percent to $3.72 on 81 million shares versus $3.52 on 86 million shares for the same period one year ago. The U.S. Tax Cuts and Jobs Act, enacted in December 2017, significantly reduced the federal corporate income tax rate and required the company to revalue its deferred income tax liabilities based on the lower enacted federal corporate income tax rate. The company’s net income for the fourth quarter ended Dec. 31, 2017, included a one-time $53 million benefit related to the initial revaluation of its deferred income tax liabilities, and the company’s fourth quarter ended Dec. 31, 2017, diluted earnings per common share of $3.52 included a 62 cent benefit from the revaluation.
Full-Year Financial Results
Commenting on O’Reilly’s full-year 2018 performance, Johnson continued, “Our 3.8 percent increase in full-year 2018 comparable store sales was at the top end of our guidance range and, coupled with a reduced tax rate under the new tax law, drove our 27 percent increase in full-year 2018 diluted earnings per share to $16.10. I would like to congratulate Team O’Reilly on their 26th consecutive year of annual comparable store sales growth and our 10th consecutive year of 15 percent or greater annual diluted earnings per share growth. Our 2018 success is a testament to the dedication of our team members, and we look forward to continuing our long track record of profitable growth in 2019.”
Johnson added that O’Reilly achieved its goal of opening 200 net, new stores across 36 states in 2018 says the company is “very well positioned” to continue profitable store growth in 2019. On Nov. 13, 2018, O’Reilly announced the signing of an asset purchase agreement with Bennett Auto Supply, and the acquisition closed after the close of business on Dec. 31, 2018.
“We set our 2019 target of between 200 and 210 net, new stores in our third quarter earnings release in October of 2018, prior to the signing of the Bennett acquisition agreement. We are still targeting that range of net, new store openings for 2019, but will likely finish at the lower end of the range due to the work related to the conversion of the Bennett stores during the first half of 2019,” said Johnson.
Sales for the year ended December 31, 2018, increased $559 million, or 6 percent, to $9.54 billion from $8.98 billion for the same period one year ago. Operating income for the year increased to $1.82 billion (or 19 percent of sales) from $1.73 billion (or 19.2 percent of sales) for the same period one year ago, representing an increase of 5 percent.
Net income for the year increased $191 million, or 17 percent, to $1.32 billion (or 13.9 percent of sales) from $1.13 billion (or 12.6 percent of sales) for the same period one year ago. Diluted earnings per common share for the year ended Dec. 31, 2018, increased 27 percent to $16.10 on 82 million shares versus $12.67 on 90 million shares for the same period one year ago. For the year ended, the company’s diluted earnings per common share of $12.67 included a one-time benefit of 59 cents from the revaluation of its deferred income tax liabilities.
Share Repurchase Program
During the fourth quarter, the Company repurchased 1.4 million shares of its common stock at an average price per share of $338.92, for a total investment of $463 million. During the year, the Company repurchased 6.1 million shares of its common stock at an average price per share of $282.80, for a total investment of $1.71 billion. Subsequent to the end of the fourth quarter and through the date of this release, the Company repurchased an additional 0.7 million shares of its common stock, at an average price per share of $341.20, for a total investment of $248 million. O’Reilly has repurchased a total of 73 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 $150.56, for a total aggregate investment of $11 billion. As of the date of this release, the company had approximately $754 million remaining under its current share repurchase authorization.
