Group 1 Automotive (GPI) Up 0.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Group 1 Automotive (GPI). Shares have added about 0.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Group 1 Automotive due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Group 1 Automotive Q4 Earnings Miss Estimates, Up Y/Y

Group 1 Automotive reported adjusted earnings per share (EPS) of $2.31 in fourth-quarter 2018, missing the Zacks Consensus Estimate of $2.45. The bottom line improved from the prior-year quarter’s number of $2.11.

The company recorded net income of $30.7 million compared with $110.5 million in the year-ago quarter. Revenues of $2.9 billion declined 0.4% year over year.

Revenues from new-vehicle retail sales fell 5.3% to $1.57 billion. The same from retailed used vehicles grew 8.8% to $771.2 million. However, revenues from wholesale used-vehicle sales declined 6.2% to $86.1 million.

In the Parts and Service business, the top line improved 3.3% to $354.7 million. Also, the company’s Finance and Insurance business witnessed 8.1% rise in revenues to $124 million.

Gross profit inched up 1.5% year over year to $432.1 million. Operating income went down 18% to $74.7 million.

2018 Results

For 2018, adjusted earnings per share were $8.91, up 15.3% from 2017.

For 2018, total revenues reached a record level of $11.6 billion, up 4.3% from the 2017 figure.

Segments in Detail

On a same-store basis, revenues in the U.S. business segment fell 1.3% year over year to $2.22 billion. New-vehicle retail sales declined 5.2% on a year-over-year basis to $1.12 billion. Total used-vehicle sales rose 4.3% to $605.6 million. Parts and Service revenues increased 2.1% year over year. Finance and Insurance revenues rose 6% on a year-over-year basis.

Revenues, on a same-store basis, fell 8% year over year to $464.6 million in the U.K. business segment. Retail new-vehicle sales declined 18.1% to $218.6 million and total used-vehicle sales rose 4.6% to $150.2 million. Parts and Service revenues improved 5.1% while Finance and Insurance revenues fell 5.5%.

On a same-store basis, revenues in the Brazil business segment declined 12.5% year over year to $109.6 million in the reported quarter. New-vehicle retail sales fell 14.5% to $70.9 million and total used-vehicle sales decreased 12.2% to $24.9 million. Parts and Service revenues declined 6.5% while Finance and Insurance revenues rose 23.2%.

Financial Details

Group 1 Automotive’s cash and cash equivalents decreased to $15.9 million as of Dec 31, 2018, from $28.8 million as of Dec 31, 2017.

Share Repurchases

In fourth-quarter 2018, Group 1 Automotive repurchased 1,313,786 outstanding shares for $75.3 million.

For 2018, the company repurchased 2,849,652 shares for $181.7 million. These repurchases represented roughly 14% of its share float at the start of 2018. As of Feb 5, 2019, Group 1 Automotive has $49.7 million worth share repurchase authorization remaining.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -19.76% due to these changes.

VGM Scores

At this time, Group 1 Automotive has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Group 1 Automotive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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