Auto stocks are on a roll, but retail is mixed

Ford Focus
Daniel Acker | Bloomberg | Getty Images

We heard yesterday from AutoNation. Its rival Group 1 Automotive reported earnings of $1.67, well above expectations of $1.34.

This is important because Group 1 gets almost one-third of sales from Texas, where there was great concern that lower oil prices might cause a drop in car sales. Rest assured, they have not stopped buying cars in Texas!

Not just car companies doing well. The people selling parts are also performing. O'Reilly Automotive easily beat estimates and posted a strong 6.3 percent comparable store sale. 2015 guidance of 3 to 5 percent comparable store sales is also solid.

O'Reilly, by the way is one of the most aggressive buyers of their own share. In 2011, for example, they had roughly 140 million common shares outstanding. At the end of 2014, it was closer to 102 million, a decline of more than 25 percent.

That is a significant improvement to the bottom line. For example, the 2015 guidance of $8.20 to $8.35 works off the 2014 level of common shares; when adjusted for proposed additional share repurchases in 2015, the guidance becomes $8.35 to $8.45, according to Wedbush.

O'Reilly Automotive (common shares outstanding)

  • 2011: 140 million
  • 2014: 102 million

Elsewhere:

Retail is mixed.

Give Michael Kors a break. It beat on earnings, but everyone is disappointed by earnings for their current quarter, 89 cents to 92 cents versus estimates of 94 cents. It threw in a special dividend as well.

There's a simple problem here. Comparable store sales were up 8.6 percent, well below expectations of 12.1 percent growth. This is the weakest comparable store sale figure Michael Kors has reported since it went public.

What's the problem? Kors is running up against the law of large numbers. In 2013, it did $2.1 billion in its fiscal year. This fiscal year it will likely do close to $4.57 billion. That's more than double the growth in two years! Who wouldn't kill for that kind of growth?

L Brands continues to knock the cover off the ball. January comparable store sales were up 7 percent, well above the 1.9 percent estimate. The stock is essentially at an historic high.

What's the secret sauce? L Brands is popular with millennials, and it has three hot segments. Bath and Body Works saw a 16-percent increase, and Victoria's Secret was up 4 percent. Pink is continuing to do well. Its price points are reasonable, and it is constantly rotating new merchandise. Pink is not promoting as much as everyone else.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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