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Value

Automobile retailers continue to see improvement as the American consumer comes out of its deep freeze. Asbury Automotive Group, Inc. grew earnings by the double digits in 2011 and is expected to again in 2012. This Zacks #1 Rank (Strong Buy) is also a value stock, with a forward P/E of 12.2.

Asbury Automotive is one of the largest car retailers in the nation.

Headquartered in Duluth, GA, it operates 79 auto and heavy truck stores and 99 franchises that sell and service 38 different brands of American, European and Asian cars and heavy trucks. About 85% of its sales are from import brands.

Asbury Beat by 26% in Q4

On Feb 14, Asbury reported its fourth quarter and full year results and surprised on the Zacks Consensus Estimate by 11 cents. Earnings were 54 cents compared to the consensus of just 43 cents. This was a 46% increase over the 37 cents earned in the fourth quarter of 2010.

Revenue rose 8% to $1.1 billion as all of its divisions contributed. Same store sales on new vehicles rose 4% while used vehicle same store sales remained hot with an increase of 18%. The finance and insurance division also saw revenue spike 24% compared to the fourth quarter of 2010.

The company also made progress on some of its strategic initiatives for the year. It paid down $95 million in debt during the year.

Asbury also repurchased $45 million of common stock, or about 8% of total common shares outstanding.

Outlook for 2012

The Japanese tsunami and subsequent issues with the supply of Japanese cars and parts looks largely behind the car industry.

Asbury is bullish about 2012 although the company didn't provide 2012 guidance.

"Considering the increasing number of consumers looking for more fuel efficient vehicles, the improving availability of consumer credit, and the strong pipeline of new products coming from all of our manufacturing partners, we believe we are well positioned as we enter 2012," said Michael S. Kearney, Executive Vice President and Chief Operating Officer.

The 2012 Zacks Consensus Estimate Rises

The analysts liked what they saw with the earnings surprise. 6 estimates moved higher for 2012 in the last week pushing the Zacks Consensus Estimate up to $2.14 from $2.05.

That is earnings growth of 17.7% which isn't too shabby coming off of 29% earnings growth in 2011.

Still a Value Stock

Shares have been on a tear the last two years as the auto sector has made a comeback from the Great Recession.

Yet there is still value in the shares.

In addition to a P/E under 15, which is the cut-off I use for value stocks, Asbury also has a price-to-book ratio of 2.7. A P/B ratio under 3.0 usually indicates "value".

The company also has a super low price-to-sales ratio of 0.2. A P/S ratio under 1.0 can mean that a company is undervalued.

Asbury also has other strong fundamentals, including a 1-year return on equity (ROE) of 18.1%, well above the average of the S&P 500 of 13%.

If you're looking for a way to tap into the revival of the American consumer. Asbury is an attractive value stock with double digit earnings growth expected in 2012.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

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