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Why Group 1 Automotive (GPI) Might be Well Poised for a Surge

Zacks Equity Research

Investors might want to bet on Group 1 Automotive (GPI), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

Analysts' growing optimism on the earnings prospects of this auto dealer is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Group 1 Automotive, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $2.62 per share for the current quarter, which represents a year-over-year change of +6.94%.

The Zacks Consensus Estimate for Group 1 Automotive has increased 10.72% over the last 30 days, as three estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

The company is expected to earn $9.68 per share for the full year, which represents a change of +8.64% from the prior-year number.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, four estimates have moved up for Group 1 Automotive versus no negative revisions. This has pushed the consensus estimate 6.08% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, Group 1 Automotive currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Group 1 Automotive shares have added 17.1% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.


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