O'Reilly Automotive, Inc. Quick Read: Weather Likely Weighed Upon Sales a Bit

EQUITY RESEARCH QUARTERLY UPDATE July 27, 2016 Stock Rating: OUTPERFORM 12-18 mo. Price Target $300.00 ORLY - NASDAQ $277.51 3-5 Yr. EPS Gr. Rate 18% 52-Wk Range $284.66-$225.12 Shares Outstanding 99.4M Float 96.8M Market Capitalization $26,767.5M Avg. Daily Trading Volume 703,011 Dividend/Div Yield $0.00/0.00% Book Value $19.87 Fiscal Year Ends Dec 2016E ROE 39.1 % LT Debt $1,397.0M Preferred $0.0M Common Equity $1,996M Convertible Available Yes EPS Basic Q1 Q2 Q3 Q4 Year Mult. 2014A 1.61 1.91 2.06 1.76 7.34 37.8x 2015A 2.06 2.40 2.53 2.19 9.17 30.3x 2016E 2.59A 2.65A 2.90 2.58 10.72 25.9x Prior (E) -- 2.80 2.89 2.52 10.80 NM 2017E -- -- -- -- 12.00 23.1x CONSUMER/HARDLINES RETAILING O'Reilly Automotive, Inc. Quick Read: Weather Likely Weighed Upon Sales a Bit SUMMARY We look upon the above-plan Q2 (Jun.) results that ORLY reported after the close on Wed. (7/27) as very solid. EPS of $2.65 topped the high end of guidance and essentially met Street figures. It s no secret that weather in many markets across the U.S. proved unusually cool in Apr. and May before warming in Jun. ORLY will host a conference call tomorrow (7/28). We expect management to indicate that unseasonable weather weighed upon comp sales early in the period, helping to better contextualize a seemingly light +4.3% comp in the period vs. a Street forecast of +5.1%. ORLY represents one of the best-run chains in a very well-positioned subsector of retail. KEY POINTS EPS About In Line with Expectations. Q2 (Jun.) EPS at ORLY increased 10% to $2.65 from an adjusted $2.40 in the prior year and was about consistent with a Street forecast for $2.67 and slightly above management guidance of $2.54 - $2.64. Comp Trends Consistent with Guidance. Q2 comps at ORLY rose 4.3% on top of a 7.2% gain in the prior year and compare with management guidance for a 3-5% increase. Two-year trends moderated 1.8% to 11.5% from 13.3% in Q1 (Mar.). Milder weather across certain regions likely weighed upon top-line trends at the chain. Gross Margins Moderate. Gross margins declined 20 bps to 51.8% from 52.0% in the prior year. This compares with gains of 50 bps in Q1 and 100 bps in Q4 (Dec.). An above-average non-cash LIFO charge likely hampered margins in the quarter, resulting in the first year-over-year decline since Q211. We await further commentary on management's conference call tomorrow morning. ORLY Updates Guidance. The company now expects FY16-EPS of $10.30- $10.70 vs. prior guidance of $10.10-$10.50 (ex. future buybacks). This remains predicated on a 3-5% comp increase. Management also introduced Q3 (Sep.) EPS guidance of $2.77-$2.87 (ex. future buybacks) based on comps of +3-5% vs. a current Street forecast of $2.93. Share repurchases typically add about $0.02- $0.04 to quarterly EPS. Revising Estimates. We are updating our estimates to reflect the reported results and updated guidance. Our FY16 (Dec.) EPS estimate goes to $10.72 from $10.80, while our FY17 (Dec. 2017) estimate of $12.00 remains unchanged. Brian Nagel, CFA 212 667-8381 Brian.Nagel@opco.com David Bellinger 212 667-7948 David.Bellinger@opco.com Dan Farrell 212 667-7193 Daniel.Farrell@opco.com Disseminated: July 27, 2016 18:55 EDT; Produced: July 27, 2016 18:55 EDT Stock Price Performance Company Description O'Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States catering to both professional and DIY (do-it-yourself) customers. The company operates more than 4,000 stores in the United States. For analyst certification and important disclosures, see the Disclosure Appendix. Oppenheimer & Co Inc. 85 Broad Street, New York, NY 10004 Tel: 800-221-5588 Fax: 212-667-8229

O'Reilly Automotive, Inc. ORLY (OUTPERFORM) - $300.00 5-YEAR PRICE PERFORMANCE INVESTMENT THESIS 350 300 250 200 150 100 50 2012 2013 Source: Bloomberg 2014 2015 2016 ORLY Over the past several years, ORLY has matured into one of the best-run and best-positioned chains within the Aftermarket Auto Parts sector and broader Retail. As we look forward, we are encouraged that ORLY remains well positioned to capitalize upon a solid sector backdrop and market share opportunities coming as a result of ongoing struggles at leading competitors. We view current Street forecasts for ORLY as achievable and likely subject to upside. The later cycle attributes of sector demand afford investors protection in a potentially elongated US economic recovery, supporting the premium valuation on shares. BASE CASE ASSUMPTION Continued mid-single-digit comp gains Annual store growth of about 200 new units Upwards of $1B in annual share repurchases CATALYSTS New car sales data Management commentary from auto dealers and OEMs Quarterly earnings reports from ORLY UPSIDE SCENARIO More aggressive market share gains in the still fragmented commercial market Favorable macro tailwinds from depressed gas prices, increased miles driven, and higher average age of cars Successful expansion into international markets DOWNSIDE SCENARIO Unfavorable weather impacting demand for maintenance and repairoriented auto parts A downshift in prospects for lower income consumer spending amid a potentially softer economic environment No let-up in the hold that small distribution companies have on the commercial space in select markets PRICE TARGET CALCULATION Our $300 price target is predicated upon a multiple of about 25x our FY17 (Dec.) EPS forecast of $12.00, a level consistent with ORLY's above-average longer term growth prospects and the valuations of other high-quality retail stocks. KEY RISKS Risks to our price target include a potential worsening of economic conditions for lower income consumers, waning benefits of reduced fuel prices or a spike higher in gas prices, stepped-up competition in the Aftermarket Auto Parts sector, and/or declining interest on the part of investors in high-quality albeit now somewhat higher multiple larger cap Retail stocks. 2 Brian Nagel, CFA: 212 667-8381

ORLY (OUTPERFORM) - $300.00 O'Reilly Automotive, Inc. 27-Jul-2016 O'REILLY AUTO PARTS INCOME STATEMENT Fiscal year ends December, Dollars in thousands, except per share data First Quarter Second Quarter Third Quarter Fourth Quarter Q1 14A Q1 15A Q1 16A Q2 14A Q2 15A Q2 16A Q3 14A Q3 15A Q3 16E Q4 14A Q4 15A Q4 16E FY 14A FY 15A FY 16E FY 17E Net Sales $1,727,943 $1,901,903 $2,096,150 $1,847,088 $2,035,518 $2,176,689 $1,876,872 $2,080,201 $2,236,625 $1,764,178 $1,949,052 $2,095,968 $7,216,081 $7,966,674 $8,605,432 $9,162,910 Cost of Goods Sold (Incl. Warehouse/Distribution Exp.) 850,227 914,944 998,571 896,211 976,727 1,049,510 908,671 990,947 1,063,515 852,071 921,413 986,363 3,507,180 3,804,031 4,097,959 4,345,968 Gross Profit 877,716 986,959 1,097,579 950,877 1,058,791 1,127,179 968,201 1,089,254 1,173,110 912,107 1,027,639 1,109,606 3,708,901 4,162,643 4,507,473 4,816,942 SG&A (Incl. Occupancy) 590,596 636,586 678,953 614,403 654,023 702,118 624,433 673,994 713,036 609,095 665,019 703,407 2,438,527 2,629,622 2,797,514 2,972,448 Operating Income 287,120 350,373 418,626 336,474 404,768 425,061 343,768 415,260 460,074 303,012 362,620 406,199 1,270,374 1,533,021 1,709,959 1,844,494 Other Income/(Expense), Net (12,160) (12,709) (13,052) (11,676) (13,560) (16,267) (11,450) (14,392) (18,830) (12,906) (12,994) (17,432) (48,192) (53,655) (65,580) (68,993) Pretax Income 274,960 337,664 405,574 324,798 391,208 408,794 332,318 400,868 441,244 290,106 349,626 388,767 1,222,182 1,479,366 1,644,379 1,775,500 Income Taxes 101,100 124,800 150,200 119,151 145,787 151,000 115,321 146,400 163,260 108,428 131,050 143,844 444,000 548,037 608,304 656,935 Net Income $173,860 $212,864 $255,374 $205,647 $245,421 $257,794 $216,997 $254,468 $277,984 $181,678 $218,576 $244,923 $778,182 $931,329 $1,036,075 $1,118,565 Earnings Per Share $1.61 $2.06 $2.59 $1.91 $2.40 $2.65 $2.06 $2.53 $2.90 $1.76 $2.19 $2.58 $7.34 $9.17 $10.72 $12.00 Weighted Average Shares (Diluted) 108,070 103,257 98,537 107,556 102,109 97,282 105,222 100,770 95,704 103,330 99,935 94,974 106,045 101,518 96,624 93,186 Dividend Per Share $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Growth Sales 9.0% 10.1% 10.2% 7.7% 10.2% 6.9% 8.6% 10.8% 7.5% 8.8% 10.5% 7.5% 8.5% 10.4% 8.0% 6.5% Comps 6.3% 7.2% 6.1% 5.1% 7.2% 4.3% 6.2% 7.9% 5.0% 6.3% 7.7% 5.0% 6.0% 7.5% 5.1% 4.0% SG&A Expenses 7.9% 7.8% 6.7% 6.7% 6.4% 7.4% 7.9% 7.9% 5.8% 8.1% 9.2% 5.8% 7.6% 7.8% 6.4% 6.3% Operating Income 14.4% 22.0% 19.5% 13.6% 20.3% 5.0% 14.4% 20.8% 10.8% 18.5% 19.7% 12.0% 15.1% 20.7% 11.5% 7.9% Net Income 12.7% 22.4% 20.0% 16.1% 19.3% 5.0% 16.4% 17.3% 9.2% 19.3% 20.3% 12.1% 16.1% 19.7% 11.2% 8.0% Earnings Per Share 18.2% 28.1% 25.7% 21.0% 25.7% 10.3% 21.9% 22.4% 15.0% 25.5% 24.4% 17.9% 21.6% 25.0% 16.9% 11.9% Margins Gross 50.8% 51.9% 52.4% 51.5% 52.0% 51.8% 51.6% 52.4% 52.5% 51.7% 52.7% 52.9% 51.4% 52.3% 52.4% 52.6% SG&A 34.2% 33.5% 32.4% 33.3% 32.1% 32.3% 33.3% 32.4% 31.9% 34.5% 34.1% 33.6% 33.8% 33.0% 32.5% 32.4% Operating 16.6% 18.4% 20.0% 18.2% 19.9% 19.5% 18.3% 20.0% 20.6% 17.2% 18.6% 19.4% 17.6% 19.2% 19.9% 20.1% Pretax Income 15.9% 17.8% 19.3% 17.6% 19.2% 18.8% 17.7% 19.3% 19.7% 16.4% 17.9% 18.5% 16.9% 18.6% 19.1% 19.4% Net Income 10.1% 11.2% 12.2% 11.1% 12.1% 11.8% 11.6% 12.2% 12.4% 10.3% 11.2% 11.7% 10.8% 11.7% 12.0% 12.2% Tax Rate 36.8% 37.0% 37.0% 36.7% 37.3% 36.9% 34.7% 36.5% 37.0% 37.4% 37.5% 37.0% 36.3% 37.0% 37.0% 37.0% Source: Company Reports and OpCo Estimates Annual 3

O'Reilly Automotive, Inc. ORLY (OUTPERFORM) - $300.00 Disclosure Appendix Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subject securities, which are reflected in the ratings as well as in the substance of this report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Potential Conflicts of Interest: Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm including the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest. All price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer & Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target price histories, please write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager. Oppenheimer & Co. Inc. Rating System as of January 14th, 2008: Outperform(O) - Stock expected to outperform the S&P 500 within the next 12-18 months. Perform (P) - Stock expected to perform in line with the S&P 500 within the next 12-18 months. 4

ORLY (OUTPERFORM) - $300.00 O'Reilly Automotive, Inc. Underperform (U) - Stock expected to underperform the S&P 500 within the next 12-18 months. Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potential conflict of interest. Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008: Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments, and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector. Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due to a perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/or will perform less well than higher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy, aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere. Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weakness perceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group. Distribution of Ratings/IB Services Firmwide IB Serv/Past 12 Mos. Rating Count Percent Count Percent OUTPERFORM [O] 282 55.08 114 40.43 PERFORM [P] 228 44.53 67 29.39 UNDERPERFORM [U] 2 0.39 1 50.00 Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform. Company Specific Disclosures Oppenheimer & Co. Inc. makes a market in the securities of ORLY. Additional Information Available Please log on to http://www.opco.com or write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager. Other Disclosures This report is issued and approved for distribution by Oppenheimer & Co. Inc. Oppenheimer & Co. Inc. transacts business on all principal exchanges and is a member of SIPC. This report is provided, for informational purposes only, to institutional and retail investor clients of Oppenheimer & Co. Inc. and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The analyst writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security recommended in this report, the recipient should consider whether such recommendation is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice of a financial advisor. Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this report. Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may realize losses on investments 5

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