Will New Vehicle Unit Propel Group 1's (GPI) Q2 Earnings?
Group 1 Automotive’s GPI new vehicle retail unit — which mostly accounts for around 45-50% of the company’s total revenues — is likely to have fueled second-quarter 2023 earnings, set to be released tomorrow, before market open.
(Also read: Here's What to Expect from Group 1's Q2 Earnings Release)
Q1 Highlights of GPI’s New Vehicle Segment
Total new-vehicle retail revenues increased 12.1% from the prior-year quarter to $1,955.7 million. The U.S. market accounted for around 82% of the total new vehicle retail sales and witnessed 12.2% growth year over year to $1,608.6 million. New vehicle retail sales in the UK market also grew 11.3% to $347 million. However, high cost of sales clipped the gross profit of the segment. Gross profit of the new vehicle unit declined 7.3% to $186.7 million in the last reported quarter.
How Have Things Shaped Up for This Earnings Season?
Second-quarter vehicle sales volumes in the United States were aided by improvements in inventory levels. Additionally, the demand for automobiles remained strong, indicating that the rise in interest rates has not yet significantly affected purchasing decisions. We expect robust U.S. vehicle sales to boost the results of auto retailers, including Group 1.
We project Group 1 to record new vehicle sales of 31,739 units in the United States, edging up 0.4% year over year. Additionally, our estimates call for a rise in the average selling price (ASP) to $51,680 from $49,380 in the year-ago period. Consequently, our model projection for U.S. new vehicle retail revenues is $1,640 million, implying growth of 5% year over year.
Our forecast also indicates an increase in UK new vehicle retail revenues backed by expected year-over-year growth in volumes and ASP. Our estimate for retail new vehicle units in the UK market is pegged at 8,203, suggesting 14% increase year over year. ASP is predicted at $40,853, implying an increase from $40,241 recorded in the corresponding period of 2022. As such, our model projects UK new vehicle retail revenues at $335.1 million, indicating growth from $289.5 million registered in the year-ago period.
While we expect year-over-year revenue growth in the new vehicle retail segment, our estimate for gross profit from the segment is $181.4 million, implying a contraction of 13.8% year over year. High cost of sales is likely to have continued in the quarter-to-be reported and partially offset the robust sales.
GPI’s Overall Earnings & Revenue Projections for Q2
The Zacks Consensus Estimate for Group 1’s second-quarter earnings and revenues is pegged at $11 per share and $4.43 billion, respectively.
Our model predicts an earnings beat for Group 1 this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. GPI has an Earnings ESP of +2.85% and a Zacks Rank #2.
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Other Stocks With Favorable Combination
Here are a few other stocks in the auto sector that are worth considering, as these have the right combination of elements to come up with an earnings beat this time around:
Oshkosh Corp OSK has an Earnings ESP of +10.58% and a Zacks Rank #1. The automotive parts provider is set to report results on Aug 1.
The Zacks Consensus Estimate for OSK’s to-be-reported quarter’s earnings and revenues is pegged at $1.62 per share and $2.24 billion, respectively. The consensus mark for second-quarter earnings per share has moved 2 cents north in the past 30 days.
Lear Corporation LEA has an Earnings ESP of +3.16% and a Zacks Rank #1. This manufacturer of automotive seating and electronic systems is slated to report results on Aug 1.
The Zacks Consensus Estimate for LEA’s to-be-reported quarter’s earnings and revenues is pegged at $3.05 per share and $5.72 billion, respectively. LEA surpassed earnings estimates in the last four quarters, with the average being 15.5%.
Rivian Automotive RIVN has an Earnings ESP of +6.25% and a Zacks Rank #2. The electric vehicle company is set to report results on Aug 8.
The Zacks Consensus Estimate for RIVN’s to-be-reported quarter’s bottom line and revenues is pegged at a loss of $1.42 per share and $932.3 million, respectively. RIVN surpassed earnings estimates in three of the last four quarters and missed in the other, with the average being 6.08%.
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Lear Corporation (LEA) : Free Stock Analysis Report
Group 1 Automotive, Inc. (GPI) : Free Stock Analysis Report
Oshkosh Corporation (OSK) : Free Stock Analysis Report
Rivian Automotive, Inc. (RIVN) : Free Stock Analysis Report
