Moody’s Investors Services has upgraded its corporate family and probability of default ratings on Group 1 Automotive Inc. (GPI) to "Ba2" from "Ba3". The revision is based on the company’s improved financial position and lower credit risk. Moreover, Moody’s conferred a stable outlook on the company.
The enhancement in rating by Moody’s also reflects the company’s initiative in debt reduction and cost control. These measures are leading to higher profits.
Group 1, in the second quarter of 2012, registered a 21.4% increase in adjusted earnings per share to $1.25 from $1.03 in the corresponding quarter last year. The earnings per share surpassed the Zacks Consensus Estimate of $1.16. Profit escalated 20.1% to $29.7 million from $24.8 million in the year-ago quarter.
Total revenues went up 28.6% year over year to $1.9 billion in the quarter, owing to the strong retail new vehicle and used vehicle unit sales. Revenues beat the Zacks Consensus Estimate of $1.7 billion.
The rating service considers that the uncertainty concerning Toyota Motor Corporation (TM), which constitutes about 30% of the company’s revenues, has largely been minimized. Toyota’s business was jeopardized due to vehicle recalls and supply shortages emanating from the earthquake and tsunami in Japan last year.
Headquartered in Memorial City of Houston, Texas, Group 1 Automotive is one of the largest automotive retailers in U.S., providing 31 automotive brands. It has 122 automotive dealerships, 159 franchises and 28 collision centers in the U.S. and the U.K. The company offers new and used cars, light trucks and is also engaged in sales financing activities.
In addition, the company provides insurance contracts, maintenance and repair services along with vehicle parts to its customers. It competes with AutoNation Inc. (AN) and Penske Automotive Group Inc. (PAG). Currently, Group 1 retains a Zacks #2 Rank, which translates into a short-term (1 to 3 months) Buy rating.
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