Goldman Still Selling O'Reilly Automotive Into Earnings

Goldman Sachs maintained its Sell rating on O'Reilly Automotive Inc (NASDAQ: ORLY), which will report its first quarter numbers on April 27.

The consensus estimate calls for 21 percent year-over-year growth in earnings at $2.49 a share and 8.30 percent increase in revenue to $2.06 billion.

Though the company guided to 3-5 percent same-store sales growth, analyst Matthew Fassler noted it has tended not to guide above that level despite higher sales. Goldman said it sees same-store sales growth of 5.5 percent, slightly above Street's 5.4 percent and the "estimates look conservative" based on typical seasonality.

Fassler said the results of Genuine Parts Company (NYSE: GPC) would correspond to same-store sales growth of at least 7 percent for O'Reilly, which would bring results in line with typical seasonality.

Commenting on the Sell rating, Fassler said, "Our more guarded stance is based on the premise that tough winter weather helped the sector for two years running, and that recent mild winter weather will drive a pause in sales trends in 2Q/3Q."

The analyst compared the current scenario with 2012, when sales were solid through a mild winter, but slowed as the year progressed, despite a hot summer. This weather-related situation resulted in most companies in the sector, including O'Reilly, missing sales estimates at that time despite exiting first quarter confident in the outlook.

However, the analyst noted, "The one factor that plays to ORLY's favor in this context is the reality that its winter backdrop, while mild, was less subdued – based on regional exposure – than it was for peers."

The analyst, who sees 2016 EPS estimates at $10.63, raised price target on the stock to $266 from $251.