O'Reilly Automotive Breaks Out After Strong Earnings

O'Reilly Automotive, Inc. (ORLY) shares rose more than 8% during Thursday's session following the release of strong third quarter financial results after Wednesday's market close. Revenue rose 7.7% to $2.67 billion, beating consensus estimates by $30 million, and net income reached $5.08 per share, beating consensus estimates by 29 cents per share. These results came in higher than even the highest analyst expectations.

Looking ahead, the company expects full-year revenue of $10 billion to $10.3 billion, which was higher than the $10.1 billion consensus estimate, and earnings per share of $17.75 to $17.85, which was higher than the $17.55 consensus estimate.

Analyst reacted favorably to the much-better-than-expected earnings and guidance. Wells Fargo reiterated its Outperform rating and raised its price target on O'Reilly Automotive stock to $455 per share, citing the strong results and margin expansion. Meanwhile, Wedbush reiterated its Neutral rating but raised its price target to $425, noting that the results beat expectations on both the top and bottom lines.

From a technical standpoint, the stock broke out from trendline resistance to fresh 52-week highs. The relative strength index (RSI) moved into overbought territory, with a reading of 76.64, but the moving average convergence divergence (MACD) accelerated its bullish uptrend. These indicators suggest that the stock could see some near-term consolidation, but the long-term trend higher remains in place.

Traders should watch for some consolidation above trendline support at $410 over the coming sessions. If the stock breaks down from these levels, traders could see a move to test trendline support and the 50-day moving average at $393.58. If the stock breaks higher, traders could see a move toward the upper end of its long-term price channel into the mid-$400s.

The author holds no position in the stock(s) mentioned except through passively managed index funds.