Morgan Stanley Trims O’Reilly Auto (ORLY) Target Price to $108, Due To Rising Costs

O’Reilly Automotive Inc. (NASDAQ:ORLY) is 1 of the 14 Best Consumer Discretionary Stocks to Buy Right Now.

On February 9, Morgan Stanley trimmed its people terms connected O’Reilly Automotive by 1.8% to $108 (from $110), portion keeping its Overweight telephone connected the stock. This terms people update was a effect of the steadfast reducing its 2026 and 2027 EPS forecasts for ORLY by 4% and 3.5%, respectively, owed to rising outgo pressures (specifically aesculapian and casualty self-insurance costs), which were evident successful the company’s 4th quarter results.

O’Reilly released its Q4 2025 net study connected February 4, which showed 9.8% YoY maturation successful nett income to $605.2 cardinal (from $551.1 million). On a per diluted stock basis, net grew 12.7% YoY to $0.71 (from $0.63). Earnings maturation was driven chiefly by income growth, which offset a flimsy uptick successful costs.

Sales grew 7.8% YoY to $4.4 cardinal (from $4.1 billion). Growth was balanced, with 5.6% coming from same-store income growth. The remainder of the maturation came from store number expansion, with 207 nett store additions YoY, bringing the company’s full store footprint to 6,585 (from 6,378).

The uplift from income offset the 80-basis constituent YoY erosion successful operating nett margins (from 18.8% to 18.0%). 50 retired of the 80-basis-point contraction came from an uptick successful outgo of income (from 51.3% of income to 51.8%). The remainder came from higher selling, general, and administrative expenses (from 33.0% of income to 33.3%), specifically from higher squad subordinate wellness attraction and casualty assertion costs.

Management besides provided its guidance for 2026. They expect 225 to 235 nett store additions and 3.0% to 5.0% YoY maturation successful same-store sales, which would output gross maturation of astir 5.2% to 6.9%. This gross maturation would bring full-year gross to $18.7 cardinal to $19.0 billion. Management is targeting gross nett margins of 51.5% to 52.0% and operating nett margins of 19.2% to 19.7%, resulting successful diluted net per stock of $3.10 to $3.20.

O’Reilly Automotive Inc. (NASDAQ:ORLY) is simply a retail outlet relation engaged successful the organisation and retail of automotive aftermarket parts, equipment, supplies, and accessories. The institution is based successful Springfield, Missouri, and was founded successful November 1957 by Charles F. O’Reilly and Charles H. O’Reilly.

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