S&P Boosts Group 1 Ratings
Standard & Poor's Ratings Services has upgraded corporate credit ratings of Group 1 Automotive (GPI) to “BB” from “BB-” based on the company’s profitability and sustained creditability.
S&P also uplifted its rating on senior unsecured notes to “B+” from “B” and maintained its recovery rating at “6”. This implies that lenders will get negligible recovery in case of a payment default.
S&P assigned a ‘stable’ outlook on the company taking into consideration its operating efficiency and financial stability, which will ensure consistency in credit measures. The company believes the company’s higher profitability is sustainable as its EBITDA margin stood at 3.7%, funds from operations (:FFO) to total debt at 25%, and lease-adjusted total debt to EBITDA went down to 3.4x in 2011 from 4.2x in 2010.
Headquartered in Memorial City of Houston, Texas, Group 1 Automotive was founded in 1997. The company is one of the five largest automotive retailers in US which provides 31 automotive brands. It has 111 automotives under its dealership, 143 franchises and 28 collision centers in US and UK. The company offers new and used cars, light trucks and is also engaged in sales financing activities. It also 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).
Group 1 recorded a 52% increase in profit to 94 cents per share in the fourth quarter of 2011 compared with 62 cents per share in the corresponding quarter of last year. The profit surpassed the Zacks Consensus Estimate by 6 cents per share.
Revenues in the quarter rose 13% to $1.6 billion. The increase was driven by strong sales of new vehicle and significant improvement in the operating models. Currently, the company retains a Zacks #1 Rank, which implies a “Strong Buy” rating for the short-term.
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