01—Abstract
Summary
Summary of the 8-K filed February 4, 2026. Cited figures are marked; the original filing is the authoritative source.
O'Reilly Automotive (ORLY) reported record fourth-quarter and full-year 2025 results, extending its streak to 33 consecutive years of annual comparable store sales growth.
Q4 sales rose 8% to $4.41 billiona, comparable store sales grew 5.6% (on top of 4.4% a year earlier), and diluted EPS increased 13% to $0.71. Operating income grew 12% to $829 million, with the operating margin expanding to 18.8% from 18.0%, supported by a 50-basis-point gain in gross margin to 51.8%. For the full year, sales reached $17.78 billion (+6%), comparable store sales grew 4.7% (the high end of the revised 4.0%-5.0% guidance), and diluted EPS rose 10% to $2.97.
Management flagged that SG&A again exceeded expectations in Q4 due to inflation in team member health care and casualty claim costs, which is the key margin watch item. Cash generation weakened in 2025. Operating cash flow was $2.76 billionb, down from $3.05 billion, and free cash flow fell to $1.56 billion from $1.99 billion, as inventory growth ($5.73 billion, up about 12%) and capital expenditures ($1.17 billion) absorbed cash.
O'Reilly still returned $2.10 billionc to shareholders through buybacks, repurchasing 22.7 million shares, and about $2.26 billion remains under current authorizations. Long-term debt rose to $6.02 billion, and the company carries a shareholders' deficit of $(763) million, a common feature of its leveraged buyback strategy. Adjusted debt to EBITDAR ticked up to 2.03x from 1.99x.
For 2026, guidance calls for comparable store sales growth of 3.0%-5.0%, total revenue of $18.7d-19.0 billion, diluted EPS of $3.10-3.20 (roughly 4%-8% growth), an operating margin of 19.2%-19.7%, and free cash flow of $1.8-2.1 billion. The company plans 225-235 net new stores, reflecting continued expansion and the new Virginia distribution center that supports mid-Atlantic growth. The guidance implies a modest deceleration in comparable sales and earnings growth versus 2025, and investors will likely focus on whether SG&A cost inflation can be contained and whether free cash flow recovers.
02—Key points
Key Highlights
- Q4 2025 sales rose 8% to $4.41 billion, with comparable store sales up 5.6% on top of a 4.4% gain in the prior-year quarter.
- Q4 diluted EPS increased 13% to $0.71, and operating income grew 12% to $829 million (18.8% of sales, up from 18.0%).
- Full-year 2025 sales reached $17.78 billion (+6%), comparable store sales rose 4.7%, and diluted EPS grew 10% to $2.97.
- SG&A ran above expectations in Q4 due to health care and casualty claim cost inflation, a key margin pressure point.
- Free cash flow fell to $1.56 billion in 2025 from $1.99 billion, as inventory build and $1.17 billion of capex outpaced operating cash flow.
- The company repurchased $2.10 billion of stock in 2025 (22.7 million shares), with about $2.26 billion remaining under authorizations; long-term debt rose to $6.02 billion.
- 2026 guidance: comparable store sales +3%-5%, EPS $3.10-3.20, operating margin 19.2%-19.7%, free cash flow $1.8-2.1 billion, and 225-235 net new stores.
03—Questions
Frequently Asked Questions
How did O'Reilly perform in the fourth quarter and full year of 2025?
Q4 sales increased 8% to $4.41 billion, comparable store sales grew 5.6%, and diluted EPS rose 13% to $0.71. For the full year, sales grew 6% to $17.78 billion, comparable store sales rose 4.7% (the high end of revised guidance), and diluted EPS increased 10% to $2.97. The company also extended its 33-year streak of annual comparable sales growth.
What is the 2026 outlook, and how does it compare with 2025?
Guidance calls for comparable store sales of 3%-5% (versus 4.7% in 2025), total revenue of $18.7-19.0 billion, and diluted EPS of $3.10-3.20, roughly 4%-8% above 2025's $2.97. The operating margin is guided to 19.2%-19.7%, compared with 19.5% in 2025, implying some margin pressure. The outlook points to a moderation in growth relative to 2025.
Why is free cash flow declining, and is it a concern?
Free cash flow fell to $1.56 billion in 2025 from $1.99 billion in 2024. Operating cash flow dropped to $2.76 billion from $3.05 billion, driven by a $605 million inventory increase and a $244 million outflow in other operating items, while capex rose to $1.17 billion. Management guides to $1.8-2.1 billion of free cash flow in 2026, which would be a recovery, but investors should watch working capital discipline and the impact of store and distribution center investments.
How is O'Reilly managing cost pressures and shareholder returns?
Management acknowledged that SG&A exceeded its expectations in Q4 because of rising health care and casualty claim costs, and says it is working to mitigate these pressures while prioritizing service levels. On capital returns, the company bought back $2.10 billion of stock in 2025, including $500 million in Q4, and has about $2.26 billion remaining under its authorizations. Debt levels continued to rise, with adjusted debt to EBITDAR at 2.03x, so the pace of buybacks relative to cash generation is worth monitoring.
What growth drivers does the company highlight for 2026?
The company plans 225-235 net new stores in 2026, following 207 net openings in 2025 across the U.S., Mexico, and Canada. It cites share gains on both the do-it-yourself and professional sides of the business, supported by customer service and parts availability. The new Virginia greenfield distribution center is expected to unlock store growth in the mid-Atlantic region.
04—Continue