The Earnings Report of O'Reilly Automotive Indicates the State of Its Commercial Health
In the second quarter of 2025, O'Reilly Automotive continued its impressive run, reporting another quarter of upbeat financial results. The company's diluted earnings per share increased by 11% year over year to $0.78, driving a 23% gain in its shares since the beginning of the year (as of July 28).
O'Reilly's success is driven by three key factors: aggressive store expansion, margin resilience, and a strong share repurchase program. The company expanded its store count by 105 net new stores in Q2, fueling a 6% year-over-year revenue increase to $4.53 billion and a 4.1% comparable store sales rise. This demonstrates effective market share capture without cannibalizing existing sales.
The company's extensive distribution network enables efficient inventory management and high service standards, supporting sustainable growth and margin preservation. O'Reilly's disciplined capital allocation, including retiring about 60% of its shares since 2011, enhances shareholder value and reflects long-term confidence.
Regarding valuation, O'Reilly Automotive's current stock price appears expensive compared to both its historical averages and industry peers. The forward price-to-earnings (P/E) ratio stands at 33.4, significantly above its own five-year average of 23.2. Similarly, the price-to-sales ratio is about 5.0, well above its five-year average of 3.7. These elevated multiples suggest the stock has run ahead of fundamentals and might face a price pullback before further gains.
Despite this, the trend of positive same-store sales (SSS) continues for O'Reilly. The company registered positive SSS for the 32nd straight year in 2024. This trend supports demand for O'Reilly's products and services. In Q1 of 2025, O'Reilly's SSS were up 3.6%, and they grew again in Q2 by 4.1%.
O'Reilly generated free cash flow of $449 million in Q2. The average age of passenger vehicles in the U.S. is now 12.8 years, according to S&P Global, a trend that requires more maintenance spending on older vehicles. This bodes well for O'Reilly's business, as it caters to the automotive aftermarket.
As of Q2, O'Reilly has 6,483 locations, with a small presence in Canada and Mexico. The company aims to open 200 to 210 net new stores in 2025. O'Reilly's gross margin was 51.4% and operating margin was 20.2% in Q2.
Investors have shown positive sentiment towards O'Reilly's quarterly results. The company's business appears to be on extremely strong footing, with executives upgrading guidance, predicting SSS will climb 3% to 4.5% for the full year. O'Reilly Automotive's shares have soared 224% in the past five years, outperforming the broader market.
Despite the high P/E multiple, O'Reilly's sustained success, strong growth, and recession-resistant business model make it an attractive investment for many. However, potential investors should exercise caution due to the stock's current valuation.
[1] O'Reilly Automotive Inc. (ORLY). (2025). Q2 Earnings Release. Retrieved from [link to the source] [2] O'Reilly Automotive Inc. (ORLY). (2025). Investor Relations. Retrieved from [link to the source] [3] Kroll, J. (2025). O'Reilly Automotive Stock: Expensive or a Buy? The Motley Fool. Retrieved from [link to the source]
- The financial industry, along with investors, have shown immense interest in O'Reilly Automotive, given its impressive financial results and promising outlook.
- Business expansion plays a vital role in O'Reilly Automotive's success, with the company planning to open a considerable number of new stores in 2025.
- Investors, while acknowledging the high P/E multiples of O'Reilly Automotive, find it attractive due to its sustained success, growth, and recession-resistant business model.
- The automotive retail industry stands to gain from the increasing maintenance spending on older vehicles, a trend indicated by the average age of passenger vehicles in the US.
