Four Stocks to Beat the Sell-Off: Eli Lilly & Co. (LLY), CVS Caremark Corporation (CVS), Beam Inc (BEAM)

AutoZone reaction to O’Reilly’s earnings was a small bump in buying volume, and no significant move in price.  In fact, AutoZone has remained trapped within itself since the 2012 peak.  O’Reilly Automotive delivered a gross margin beat of over 50%, although its profit margin remained below 10%. Here AutoZone has a slight edge with a profit margin of 10.9%.  In addition, AutoZone’s forward P/E of 12.3 is a shade ahead of O’Reilly’s, 15.7.  But again, O’Reilly Automotive is pressuring all-time highs, something AutoZone hasn’t yet managed.

O’Reilly beat year-on-year revenue by 8.0%, on a 4.2% increase in comparable store sales.  This netted a 23% increase in adjusted diluted earnings per share, their 16th consecutive quarter of earnings growth.  Warm weather was blamed for lower sales, which dragged from the third quarter.  Recent storms in the Midwest will likely be blamed for lower sales (at the other end of the temperature scale), as the arrival of spring tends to kick start earnings season.  This will likely translate into a weaker Q1, but a stronger Q2.  However, adverse weather also means a greater number of repairs, so there could be an all around net gain.

Going forward, falling unemployment rates mean more people on the roads, which means more business for O’Reilly Automotive. The company is looking for miles-driven to increase over 2013.  Improvements in auto motor reliability means fewer repairs, but the flip side is the net value of required repairs has increased; these elements should offset over 2013.

The company opened its 4,000th store in January, and has aggressive plans to open 190 net new stores for 2013.  However, optimism for a normalization in the weather may be a little premature.

Summary

The November-February rally looks to be coming to a close, but this will mean new stocks will start coming to the fore. All four of the aforementioned stocks have enjoyed significant gains during the cyclical bull market kicked off in 2009, but have taken more of a back seat since the November rally. However, now may be their time to reassert their prior leadership, and should be closely monitored for new all-time highs.

The article Four Stocks to Beat the Sell-Off originally appeared on Fool.com and is written by Declan Fallon.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.