Group 1 Automotive (GPI) Up 2.2% 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 2.2% in that time frame, outperforming 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 drivers.
Group 1's Q2 Earnings and Sales Beat Estimates
Group 1 Automotive reported second-quarter 2023 adjusted earnings per share of $11.73, which beat the Zacks Consensus Estimate of $11. The outperformance can be primarily attributed to higher-than-anticipated revenues from the New Vehicle Retail segment. The bottom line, however, decreased from the prior-year quarter’s $12 per share. The automotive retailer registered net sales of $4,558.5 million, beating the Zacks Consensus Estimate of $4,411 million. Also, the top line rose from the year-ago quarter’s $4,145 million.
Quarter Highlights
New-vehicle retail sales increased 21.2% from the prior-year quarter to $2,243.2 million and exceeded our projection of $1,975.4 million on the back of higher-than-expected volumes and average selling prices (ASPs). Total retail new vehicles sold was 44,740 units, surpassing our forecast of 39,942 units on improving inventory levels and robust demand despite high costs of vehicle financing. ASP per unit in the U.S. and UK market came in at $52,201 and $42,416, topping our prediction of $51,680 and $40,947, respectively. The gross profit from the new vehicle retail unit totaled $201.5 million, decreasing 4.2% year over year but exceeding our estimate of $181.4 million owing to revenue outperformance, partially offset by higher-than-expected cost of sales.
Used-vehicle retail sales declined 3.6% from the year-ago period to $1,450.6 million but outpaced our forecast by $48.5 million on higher-than-expected ASP per unit in both the U.S. and UK market. ASP per unit in the United States and United Kingdom came in at $31,397 and $29,708, topping our prediction of $29,905 and $28,616, respectively. The gross profit from the unit was $78.8 million, shrinking 12% year over year but topping our estimate of $63.7 million.
Used-vehicle wholesale sales rose 17.3% year over year to $112 million. The unit recorded a gross profit of $0.9 million, up 10.5% year over year. In the Parts and Service business, the top line rose 11.8% from the year-ago quarter to $562 million and gross profit increased 9.5% year over year to $304.1 million. Revenues from the Finance and Insurance (F&I) business came in at $190.3 million, unchanged from the year-ago period levels.
Segments in Detail
In the reported quarter, revenues in the U.S. business segment climbed 10.5% year over year to $3,799.6 million and crossed our forecast of $3,543.8 million on solid sales in new-vehicle and used vehicle units. The segment’s gross profit slid 1% to $669.7 million but came ahead of our prediction by $34.7 million. During the reported quarter, retail new-vehicle, retail used-vehicle and wholesale used-vehicle units sold were 36,695, 36,306 and 7,436, respectively.
In the reported period, revenues rose 7.2% year over year to $758.9 million for the U.K. business segment, lagging our estimate of $802.1 million due to lower-than-expected sales from new vehicle, used vehicle, parts/services and F&I units. The gross profit was $105.8 million, up 14.9% from the year-ago quarter and missed our projection of $111.6 million. During the reported quarter, the retail new-vehicle, retail used-vehicle and wholesale used-vehicle units sold were 8,045, 10,458 and 3,057, respectively.
Financial Position
Selling, general and administrative expenses were up 4.3% year over year to $479.9 million. Group 1 Automotive had cash and cash equivalents of $22.8 million as of Jun 30, 2023, down from $47.9 million as of 2022-end. Total debt was $2,249.6 million as of Jun 30, 2023, down from $2,082.5 million recorded on Dec 31, 2022.
During the quarter under discussion, GPI repurchased 141,199 shares at an average price of $221.52 per common share for a total of $31.3 million. As of Jun 30, 2023, the company had 14.1 million common shares outstanding. It currently has $97.4 million remaining on its authorized stock buyback program.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 11.56% due to these changes.
VGM Scores
Currently, Group 1 Automotive has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Group 1 Automotive has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Group 1 Automotive, Inc. (GPI) : Free Stock Analysis Report
