Story Stocks^®

O'Reilly Automotive is trading lower following its Q4 earnings report, as an EPS miss and below-consensus FY26 EPS guidance overshadowed an otherwise in-line top-line performance. The setup suggests margin pressure, with rising costs weighing on profitability.

• Q4 revenue came in in line, and FY26 revenue guidance was also in line, but EPS fell short and FY26 EPS guidance missed expectations, pointing to ongoing margin compression.
• Comparable sales remained healthy in Q4 at +5.6%, while FY25 comps finished at +4.7%, reflecting continued share gains in a mixed demand environment.
• FY26 comp guidance of +3-5% was a bit underwhelming and implies more moderate growth as ORLY cycles tougher comparisons.
• The professional segment continued to drive results in Q4, posting comps above +10% for a second straight quarter, while the DIY business delivered low-single-digit positive comps in Q4.
• ORLY remained cautious on DIY demand, citing inflationary pressure on consumers and transaction declines that emerged midway through Q3 and lingered into early Q4, though trends stabilized as the quarter progressed.
• Cost pressures were a key headwind in 2025, particularly higher expenses tied to team member healthcare and self-insurance programs, which weighed on margins and contributed to the Q4 EPS miss.

Briefing.com Analyst Insight:

O'Reilly's Q4 results highlight a familiar trade-off: solid sales execution offset by rising cost pressures and a more measured outlook. While comps remain healthy and professional demand continues to outperform, the weaker FY26 EPS guidance underscores the margin sensitivity of the model in a higher-cost environment, with tariffs and healthcare expenses taking a toll. Management's commentary around DIY stabilization is encouraging, but the modest comp outlook suggests limited near-term upside. We view ORLY's long-term fundamentals as intact given the stable automotive aftermarket backdrop and compelling repair-versus-replace value proposition, though the stock may struggle to gain traction until margin pressures begin to ease.