O'Reilly Goin' All-Righty

Shares of auto parts retailer O'Reilly Automotive (Nasdaq: ORLY) dropped 7.5% yesterday following the company's earnings announcement. Why the drop? Apparently, some investors weren't pleased that the company's reported $0.42 of earnings per share missed Wall Street analysts' expectations of -- ahem -- $0.43 per share.

While a missed estimate, like that pesky "Check Engine" light, sometimes points to deeper issues, often you'll find nothing under the hood that should scare off long-term investors (seems the only thing that doesn't break on my car is that warning light, but that's another story). Yesterday's Fool by Numbers on O'Reilly provides a good starting point to see if yesterday's drop was a little overblown.

First of all, same-store sales grew 3.6%. That's a respectable encore to last year's 6.1% increase and certainly nothing to panic about. It's worth nothing that after adjusting for last year's tax benefit worth $0.05 per share, earnings per share grew 13.5%. Capital expenditures rose 17% year over year, but on the same note, O'Reilly opened 24% more stores compared to last year's quarter.

Also, that 304% leap in long-term debt is not all it's cracked up to be. That's because the company essentially refinanced $75 million worth of 7.72% notes that were due May 15 at 5.39% interest. So that $75 million was in the current portion of liabilities, meaning the overall level of debt is essentially unchanged. But the refinancing saves shareholders a cool $1.74 million in annual interest expenses.

So should we ignore the warning light and keep on driving? With impeccable timing, competitor AutoZone (NYSE: AZO) also got hit with an analyst downgrade that cited possible weakness in auto parts sales. This Fool suspects more than a few investors just got nervous and bailed without noting that O'Reilly's third quarter was not out of line with its long-term performance. Even if this sector is in for a challenging period, I expect the company will do just fine in the three- to five-year horizon.

Related articles:

• O'Reilly Automotive: Fool by Numbers
• Amazon.com's Auto Focus
• AutoZone Needs a Jump Start

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Fool contributor Jason Ramage holds no financial interest in the companies mentioned here. The Fool has a disclosure policy.