Group 1 Earnings Beat on Strong Sales

Zacks

Group 1 Automotive Inc. (GPI) posted a 19.6% rise in earnings per share to $1.16 in the first quarter of 2013 from 97 cents in the prior-year quarter and outpaced the Zacks Consensus Estimate of $1.04. Net income grew 26.5% to $29.2 million from $23.1 million in the first quarter of 2012.

Revenues increased 18% to $1.96 billion, beating the Zacks Consensus Estimate of $1.89 billion. The year-over-year improvement was driven by strong retail new vehicle and used vehicle unit sales and higher revenues from Finance and insurance business.

Revenues from new vehicle sales escalated 21.7% to $1.1 billion on an 18.5% increase in unit sales to 33,096 vehicles. Revenues from retailed used vehicles improved 13.6% to $471.4 million on a 12% increase in unit sales to 23,238 vehicles.

Revenues from wholesale used vehicles went up 11.5% to $74.5 million. Used vehicles wholesaled increased 13.4% to 11,335 units. Revenues from parts and service business scaled up 11.5% to $237.5 million. The company’s finance and insurance business witnessed a 22.6% rise in revenues to $70.1 million.

Gross profit increased 15.4% to $300.5 million from $260.4 million in the year-ago quarter. Operating income improved 8.6% to $58.6 million from $54.0 million in the first quarter of 2012.

Segment Details

Revenues in the U.S business increased 8.5% to $1.7 billion due to a 10.3% increase in new vehicle retail sale and 18.9% hike in revenues from Finance and insurance business. New vehicle retail sales augmented 7.4% to 28,778 units, while used vehicle retail sales rose 6.1% to 21,116 units. Gross profit in the segment improved 8.8% to $272.9 million from $250.9 million in the year-ago quarter.

Revenues in the United Kingdom business more than doubled to $171.1 million from $78.5 million due to increases in new vehicle retail and used vehicle sales. New vehicle retail sales augmented significantly to 2,827 units from 1,147 units, while total used vehicle sales improved to 3,171 units from 1,544 units. Gross profit in the segment enhanced to $19.2 million from $9.5 million in the year ago quarter.

Revenues in the Brazil business, which was acquired on Feb 28, was $71.0 million in the quarter. New vehicle retail sales were 1,491 units, while total used vehicle sales was 629 units. Gross profit was $8.4 million in the quarter.

Financial Details

Group 1 Automotive had cash and cash equivalents of $17.7 million as of Mar 31, 2013, significantly up from $4.7 million as of Dec 31, 2012. Total debt amounted to $37.2 million as of Mar 31, 2013 compared with $31.4 million as of Dec 31, 2012. Debt to capitalization ratio was 3.7% versus 3.5% a year ago.

Acquisitions

During the quarter, Group 1 Automotive acquired four franchises in the U.K and 22 franchises in Brazil, with combined annual revenues of $827.0 million. It also disposed a franchise in Calif. which generated annual revenues of $35.0 million in 2012.

Our Take

Group 1 Automotive is one of the largest automotive retailers in the U.S., which provides 35 automotive brands. It has 143 automotive dealerships, 182 franchises and 36 collision centers in the U.S., U.K and Brazil. Currently, the company retains a Zacks Rank #3 (Hold).

Some other stocks that are performing well in the industry where Group 1 Automotive operates include Asbury Automotive Group, Inc. (ABG), AutoNation Inc. (AN) and Lithia Motors Inc. (LAD). All these companies carry a Zacks Rank #2 (Buy).

Read the Full Research Report on GPI

Read the Full Research Report on AN

Read the Full Research Report on LAD

Read the Full Research Report on ABG

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