Buy Rating on O’Reilly: Strong Top-Line and Gross Margins Offset Near-Term SG&A-Driven Margin Pressure

William Blair analyst Phillip Blee has maintained their bullish stance on ORLY stock, giving a Buy rating yesterday.

Phillip Blee has given his Buy rating due to a combination of factors that, in his view, still support a favorable long‑term outlook despite some near‑term margin pressure. He notes that O’Reilly delivered stronger‑than‑expected comparable store sales in the fourth quarter, with revenue trends outpacing market forecasts, and that gross profitability modestly improved versus last year, underscoring the resilience of the core business and pricing discipline. At the same time, he acknowledges that earnings and operating margins came in below expectations, primarily because selling, general, and administrative expenses increased more quickly than anticipated, reflecting higher costs to support growth and operations.

Blee interprets the recent acceleration in SG&A spending as a key risk that could limit further margin expansion and make additional market share gains more expensive in the short run. However, he appears to view these elevated expenses as largely related to growth investments rather than structural weakness, and believes the company’s strong top‑line performance and solid gross margin position it well to generate attractive earnings and free cash flow over time. Balancing the temporary pressure on operating margin with the durable demand backdrop and O’Reilly’s ability to outperform on sales, he ultimately concludes that the stock offers a compelling risk‑reward profile, supporting his Buy recommendation.