11:52 AM EDT, 07/31/2026 (MT Newswires) -- O'Reilly Automotive's (ORLY) underlying trends appeared to strengthen as the company entered Q3, with the company's earnings flow-through expected to improve in H2, UBS said in a Friday note.

UBS said the company is "well positioned" to expand gross margins as product acquisition costs improve and vendors start sharing benefits related to tariff refunds.

UBS further labeled O'Reilly Automotive's full-year comparable store sales guidance of 4% to 6% as "conservative," noting that the DIFM channel transaction growth is running at about 5% and inflation is expected at 1% to 2%, leading to a roughly 3% comparable floor for H2, assuming no contribution from the DIY channel.

Incorporating strong start in July, that floor moves closer to about 5.5% for the full-year, UBS said, adding that this scenario excludes benefits from higher inflation, better traffic trends, among others.

UBS maintained its buy rating with a $120 price target on the company's stock.

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