O'Reilly earns 14% more per share as buybacks shrink share count and tariff refunds arrive

O'Reilly Automotive (Nasdaq: ORLY) reported third-quarter diluted earnings of $0.97 a share, up 14% from a year earlier, on sales that rose 9% to $5.12 billion, according to its earnings release. Net income rose 8%, and the average diluted share count fell by about 5%.

What happened

Sales for the quarter ended September 30 were $5.12 billion, against $4.71 billion a year earlier, the company said. Net income rose 8% to $786 million from $726 million, while diluted earnings per share rose 14% to $0.97 from $0.85. The two growth rates differ because the company had 812 million diluted shares in the quarter, against 853 million a year earlier, a decline of 4.8% by FinanceInTime's calculation.

Chief Executive Brad Beckham attributed the per-share gain to two things: sales growth and "a $39 million benefit from tariff refunds received during the third quarter." Comparable store sales, which cover US stores open at least a year, rose 7.2%, on top of a 5.6% increase a year earlier. Beckham said the growth came from share gains, with "double-digit growth in our professional business and mid-single digit growth in DIY."

Operating income rose 13% to $1.10 billion, or 21.4% of sales, from $976 million, or 20.7% of sales. Gross profit was 52.4% of sales, against 51.9% a year earlier. Net income was 15.3% of sales, against 15.4% a year earlier.

How the share count fell

O'Reilly repurchased 11.8 million of its shares in the quarter at an average price of $87.34, a total of $1.03 billion. In the first nine months it bought back 38.5 million shares for $3.47 billion. After the quarter ended and through the date of the release, it bought an additional 2.3 million shares for $204 million. About $727 million remained under its current authorization.

The balance sheet shows how the purchases were funded in part. Long-term debt was $7.71 billion at September 30, against $5.92 billion a year earlier, an increase of $1.80 billion, or 30.4%, by FinanceInTime's calculation. Inventory was $6.17 billion, against $5.61 billion, up 9.9% by the same calculation. The release does not say how much of the increase in debt went to repurchases.

Guidance

The company raised its outlook for 2026. It now expects comparable store sales growth of 5.5% to 6.5%, against 4.0% to 6.0% in its July 29 release. Total revenue is expected at $19.0 billion to $19.3 billion, up from $18.9 billion to $19.2 billion, and diluted earnings per share at $3.25 to $3.35, up from $3.20 to $3.30. The company said the updated figures include the benefit from tariff refunds.

O'Reilly operated 6,758 stores at the end of September. It has opened 173 net new stores this year and said it is on track for 225 to 235.

What to watch

The company will discuss the results on a conference call on Thursday, October 29, at 10:00 a.m. Central Time, according to the release. The release does not give a breakdown of the tariff refunds beyond the $39 million benefit in the third quarter, and the guidance it gave includes that benefit.