Morgan Stanley Cuts O’Reilly Auto Price Target to $108 on Rising Costs
Morgan Stanley cut its target price on O’Reilly Auto to $108 after lowering its 2026 and 2027 EPS forecasts by 4% and 3.5% due to rising medical and casualty self-insurance costs. O’Reilly’s Q4 net income rose 9.8% to $605.2 million on 7.8% sales growth to $4.4 billion.
1. Morgan Stanley Target Price Revision
Morgan Stanley trimmed its target price on O’Reilly Auto from $110 to $108 after reducing 2026 EPS forecast by 4% and 2027 EPS by 3.5% to reflect increased medical and casualty self-insurance costs revealed in Q4 results.
2. Q4 2025 Financial Performance
In Q4 2025 O’Reilly reported net income of $605.2 million, up 9.8% year-over-year, and diluted EPS of $0.71, up 12.7%, driven by 7.8% sales growth to $4.4 billion, including 5.6% same-store sales gains and 207 net new store openings.
3. 2026 Outlook and Guidance
Management forecasts 225 to 235 net store additions, 3.0% to 5.0% same-store sales growth and revenue of $18.7 to $19.0 billion in 2026, targeting gross margins of 51.5% to 52.0%, operating margins of 19.2% to 19.7% and diluted EPS of $3.10 to $3.20.