JOHANNESBURG, South Africa — Cost-awareness amongst automobile consumers has lead many to invest in servicing and repairing their current vehicles rather than buying new, due to the weakened global economy. And this means bigger gains to services sector stocks, says financial analyst Bradley McCoy of Rothman Research.
In its recent research, Rothman cites two examples of stocks doing better despite the weak economy since last year — O’Reilly Automotive and AutoZone.
O’Reilly Automotive Inc. is a publicly traded chain of auto parts stores that started with one store in Springfield, Mo., in 1957. It has since grown to more than 3,400 stores in 38 states. The corporate headquarters of O’Reilly is located in Springfield. The company nearly doubled in size and boosted its presence on the West Coast with the acquisition of CSK Auto in mid-2008. The growing base of stores resulted to strong sales and sent profit soaring in the fourth quarter. O’Reilly earned $71.9 million or 52 cents per share, up from $42.7 million, or 32 cents per share, in the same quarter of last year.
As the company expanded its operations from 3,285 stores and 18 distribution centers at the beginning of the year to 3,421 stores and 20 distribution centers by the end, O’Reilly’s sales grew by 36 percent to $4.85 billion. O’Reilly CEO Greg Henslee says, "As we are looking forward to 2010, we see consumer concerns over high unemployment and a challenging macro environment as signs that our customers will continue to maintain their current vehicles and, therefore, drive demand in our industry."
AutoZone, which operates as a specialty retailer and distributor of automotive replacement parts and accessories, has been reporting solid gains since last year. The company has seen double-digit EPS growth for 14 consecutive quarters, which was propelled by a 565,000-share repurchase during the quarter. Over the long run, the continued improvement in operational performance has created tremendous value for shareholders, according to Rothman Research.
Full research reports on both companies are available as free downloads from Rothman Research. Go to www.rothmanresearch.com.
