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Group 1 Automotive (GPI) Down 16.7% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Group 1 Automotive (GPI). Shares have lost about 16.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Group 1 Automotive due for a breakout? 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 Q2 Earnings Beat Estimates, Up Y/Y

Group 1 Automotive, Inc. reported adjusted earnings per share of $2.83 in second-quarter 2019, beating the Zacks Consensus Estimate of $2.74. The bottom line improved from the prior-year quarter’s number of $2.45. Results were aided by a stellar performance in the United States despite softness in sales in the new vehicle market.

Reportedly, the company’s net income decreased 12.8% year over year to $49.2 million. Revenues of $3.01 billion increased 2.1% year over year. Revenues beat the Zacks Consensus Estimate of $2.9 billion.

Revenues from new-vehicle retail sale rose 0.6% to $1.57 billion. The same from used-vehicle retail sale increased 2.1% to $838.9 million. Also, revenues from wholesale used-vehicle sale increased 3.4% to $96 million.

In the Parts and Service business, the top line improved 5.6% to $378.2 million. Revenues from the Finance and Insurance business rose 10.6% to $127.3 million.

Segments in Detail

Revenues in the U.S. business segment increased 15.1% year over year to $2.28 billion. The segment’s gross profit rose 7.4% year over year to $336.7 million. In the reported quarter, retail new-vehicle, retail used-vehicle and wholesale used-vehicle units sold were 20,318; 30,477 and 6,828, respectively.

Revenues fell 2.5% year over year to $614.4 million in the U.K. business segment. Gross profit was $64.1 million, marking a 14.3% fall from the second quarter of 2018. In the quarter, retail new-vehicle, retail used-vehicle and wholesale used-vehicle units sold were 9,266; 8,280 and 5,772, respectively.

Financial Details

Group 1 Automotive’s cash and cash equivalents increased to $37.7 million as of Jun 30, 2019, from $15.9 million as of Dec 31, 2018.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Group 1 Automotive has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 this revision has been net zero. It comes with little surprise Group 1 Automotive has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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