ORLY O’Reilly Auto Parts 10-Q 2026-09-30 section summaries

O’Reilly Automotive — Q3 and nine months ended September 30, 2026

Sales and earnings grew year over year, with professional-customer sales outpacing DIY. Higher borrowing costs and substantial share repurchases were notable counterweights: debt rose, and shareholders’ equity remained negative.

Consolidated results

Q3 sales grew 8.8%; gross margin rose to about 52.4% from 51.8%, and operating margin to about 21.4% from 20.7%. Lower diluted share counts contributed to per-share growth. Nine-month interest paid, net of capitalized interest, was $180.7M, up from $152.1M.

Sales by customer type

Professional sales rose 12.7% in Q3, faster than DIY sales, up 6.2%. For 9M, professional sales were $7,361.207M versus $6,502.215M, and DIY sales were $6,975.384M versus $6,585.229M. Other sales and adjustments were $237.251M versus $280.234M for 9M; their 22.6% Q3 decline was steeper than the 15.3% 9M decline. ORLY reports one automotive aftermarket parts segment; its segment results are consolidated sales and net income. Operations are primarily U.S.-based, with international revenue and assets immaterial.

Cash flow and capital allocation

Inventory used $437.6M of cash, while accounts payable provided $409.6M. ORLY issued $2,446.1M of long-term debt and repaid $500.0M of principal during 9M.

The June 2026 authorization increase brought cumulative authorization to $31.8B; $931.3M remained at quarter-end. Shares outstanding fell from 841.909M at December 31, 2025, to 804.608M at September 30, 2026 (from 816.166M at June 30). Repurchases contributed to the widening shareholders’ deficit. From October 1 through November 6, ORLY repurchased another 3.0M shares for $262.8M, at an average $87.89.

Balance sheet and debt

Total debt principal was $7.750B, compared with $6.040B at year-end. Senior notes had a $7.262B carrying amount and $6.966B estimated fair value at September 30. ORLY issued $2.450B of notes during 2026, with coupons of 4.800%–5.550% and maturities from 2029 to 2037; it repaid $500M of 3.550% notes at maturity in March. Commercial paper outstanding was $450M, down from $690M. After quarter-end, the company repaid $750M of 5.750% notes due in 2026 using commercial-paper borrowings.

The $2.25B unsecured revolver had no borrowings; $5.0M of letters of credit reduced availability. ORLY reported compliance with its minimum 2.50:1 fixed-charge coverage and maximum 3.50:1 leverage covenants. Supplier-finance obligations were $5.1B at both balance-sheet dates, included in accounts payable; suppliers participate voluntarily, and payment follows invoices’ original maturities, generally within one year. Accounts payable of $7.508B exceeded current assets of $7.223B.

Other notable items

Operating lease liabilities totaled $2.585B. Lease costs rose 5.6% in Q3 to $156.668M from $148.347M and 5.2% for 9M to $464.270M from $441.403M. Warranty liabilities increased to $172.110M from $146.279M; 9M accruals of $238.650M exceeded claims of $212.812M. ORLY bears claim risk on some merchandise when suppliers provide allowances rather than assume responsibility, and estimated warranty costs are recorded at sale.

Foreign-currency translation was a $20.360M Q3 loss versus $7.059M income, and an $11.542M 9M loss versus $58.437M income. Renewable-energy tax-credit investments were held in four unconsolidated VIEs; maximum exposure was generally limited to the $7.8M net investment. The company exited one fund in Q3 and received $3.3M. Ordinary-course litigation was not expected to have an aggregate material adverse effect, considering insurance and accruals.

O’Reilly Automotive — Q3 and nine months ended September 30, 2026

Results

Sales increased 9% in both Q3 and the first nine months. Comparable-store sales rose 7.2% in Q3, versus 5.6% a year earlier, and 7.1% for 9M, versus 4.5%. Stores not yet comparable contributed $94M of Q3 growth and $285M of 9M growth. Comparable growth reflected higher average tickets for DIY and professional customers and more professional-customer transactions, partly offset by fewer DIY transactions. Higher same-SKU prices and increasingly complex, costly replacement parts supported ticket values; more durable components can reduce repair frequency and pressure transaction counts.

Gross margin expanded to 52.4% from 51.9% in Q3 and to 51.8% from 51.5% for 9M. A $39M tariff refund, improved acquisition costs in select categories, and distribution-cost leverage helped; a greater professional-customer mix and more petroleum-based commodity sales were offsets. SG&A declined as a share of sales to 30.9% from 31.1% in Q3 and to 31.7% from 31.8% for 9M, as store-cost leverage outweighed higher staffing, operating, inflationary, and—in the 9M period—casualty-insurance costs. Operating margin increased to 21.4% from 20.7% in Q3 and to 20.1% from 19.7% for 9M. Net margin was 15.3% versus 15.4% in Q3 and 14.4% versus 14.5% for 9M. Lower diluted share counts contributed to EPS growth.

Other expense rose 45% to $76M from $52M in Q3 and 23% to $199M from $163M for 9M, mainly on higher interest expense from higher average borrowings. The income-tax provision was $237M versus $198M in Q3 and $621M versus $536M for 9M; effective tax rates were 23.1% versus 21.4% and 22.8% versus 21.7%, respectively. Higher taxable income and lower share-based-compensation tax benefits contributed to the increases.

Cash flow and capital allocation

Operating cash flow increased 22.1%, primarily from higher operating income and the timing of payments for transferable federal renewable-energy tax credits. Capital expenditures fell 4.4%, mainly due to timing of store and distribution projects. Company-defined free cash flow rose 44.0%; its reconciliation includes $11.507M versus $27.714M of excess share-based-compensation tax benefits and a $3.294M return of tax-credit equity investments versus none.

Higher share repurchases, a net commercial-paper paydown (versus net borrowings in 2025), and repayment at maturity of $500M aggregate principal of senior notes increased financing cash use. These uses were partly offset by issuance of $2.5B aggregate principal of senior notes. Management identifies operating cash generation, revolving-credit borrowings, commercial paper, and senior notes as liquidity sources; weaker demand or changed customer buying patterns could constrain cash generation and covenant capacity.

Stores, strategy, and outlook

At September 30, 2026, O’Reilly operated 6,758 stores: 6,595 in the U.S. and Puerto Rico, 134 in Mexico, and 29 in Canada. Its strategy centers on serving DIY and professional customers through service, distribution and hub-store access, merchandising, omnichannel initiatives, new-store growth, and existing-store sales. Management expects 225–235 net new stores in 2026 and 265–275 in 2027.

Debt covenants and risks

The company reported covenant compliance. For the twelve months ended September 30, covenant-calculation GAAP debt was $7.711B versus $5.916B; non-GAAP adjusted debt was $10.513B versus $8.508B. Covenant non-GAAP EBITDAR was $4.868B versus $4.400B, and total fixed charges were $802.721M versus $729.295M. Covenant-calculation interest expense was $275.063M versus $229.870M, and rent expense was $512.992M versus $482.430M. A default could allow lenders to terminate commitments, accelerate principal and accrued interest, and pursue litigation. The company also reported compliance with senior-note indenture restrictions.

Longer-term aftermarket demand benefits from an aging vehicle fleet: U.S. registered vehicles reached 289M by year-end 2025, up 12.3% from 2015, while average vehicle age rose from 11.5 to 12.8 years. Management estimated 2026 U.S. light-vehicle SAAR at about 16.0M, matching 2025; miles driven increased 0.5% year to date through August 2026. Risks include inflation, tariffs and trade-policy changes, fuel and energy costs, consumer finances, competition, supply disruptions, weather, interest rates, cybersecurity and IT interruptions, labor retention, and international-market challenges. The business is seasonally stronger in Q2 and Q3. Management reported no material change in critical accounting estimates or contractual obligations since the 2025 Form 10-K.

Market Risk

As of September 30, 2026, ORLY had no borrowings under its variable-rate revolving credit facility and $0.5B of commercial-paper borrowings, bearing a 4.170% weighted-average variable rate. At that borrowing level, a 10% increase in interest rates would raise annual interest costs and reduce pre-tax earnings and cash flows by approximately $1.9M.

Cash and cash equivalents totaled $194.4M and were invested in short-term, highly liquid instruments with maturities of 90 days or less. The company expects no material investment losses and considers the associated interest-rate exposure minimal.

Foreign-currency exposure primarily arises from Mexican peso- and Canadian dollar-denominated revenue and profits. International subsidiaries’ net assets, translated at period-end exchange rates, were approximately $779M. A 10% adverse currency movement against the U.S. dollar would reduce the value of those net assets by approximately $71M; the reduction would generally be recorded as a foreign-currency translation adjustment in accumulated other comprehensive income unless the subsidiaries were sold or otherwise disposed of. A 10% change in average exchange rates would not materially affect results of operations. ORLY generally transacts in the relevant functional currencies to limit exposure and views its international investments as long-term.

The company reported no material change in market risks from those disclosed in its FY2025 Form 10-K.

Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2026, providing reasonable assurance that required information is recorded, processed, reported on time, and communicated to support disclosure decisions. No changes during the quarter ended September 30, 2026 materially affected, or were reasonably likely to materially affect, internal control over financial reporting.

As of September 30, 2026, O’Reilly Automotive reported no material changes to the risk factors disclosed in its Form 10-K for the year ended December 31, 2025. The section identifies no new or changed risks, financial metrics, or strategic developments.

For the fiscal quarter ended September 30, 2026, no Company director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement. This section reports no financial results or other business developments.