Group 1 Automotive’s Profit Improves

Group 1 Automotive (GPI - Snapshot Report) revealed a profit of $16.8 million or 71 cents per share in the third quarter, an improvement from $8.2 million or 37 cents per share in the same quarter of the previous year. With this, the company marginally exceeded the Zacks Consensus Estimate of 70 cents per share. However, weakness in the auto industry reduced Group 1’s revenue by 13% to $1.25 billion.

The U.S. Government’s “Cash for Clunkers” cash incentive program for fuel-efficient vehicles helped the auto retailer gain in the same-store gross margin. In the quarter, same-store gross margin improved to 17% from 16% in the prior-year quarter. Group 1 retailed 25,057 new vehicles during the quarter, of which 4,874 vehicles were channeled through the Clunkers program.

Group 1’s margin improvement in used vehicle as well as in parts and service business also helped gain the overall margin. Same-store used vehicle gross margin increased $228 per wholesale unit, as limited supply increased valuation. However, retail gross margins fell to 10.3% from 10.6% in the prior year as more vehicles were sourced at auction. The same-store parts and service business bettered on a year-over-year basis, with a gross margin of 53.7% compared to 53.3% in the previous year quarter.

Group 1 had cash and cash equivalents of $14.9 million as on Sep 30, 2009, compared to $23.1 million on Dec 31, 2008. Long-term debt nearly halved to $33.3 million as on Sep 30, 2009 from $64 million as on Dec 31, 2008. In the first nine months of 2009, the company’s net cash flow from operating activities remained almost flat at $54.8 million compared to $54.3 million in the year ago period.

Going forward, Group 1 expects new vehicle margins of 6%–6.5% and used vehicle retail margins of 10%–10.5%. For full year, the company anticipates earnings in the range of $1.66–$1.76 per share. This is consistent with the Zacks Consensus Estimate of $1.75 per share.

Group 1 Automotive is a Houston, Texas based retailer. It owns and operates 96 automotive dealerships, 128 franchises and 23 collision service centers in the U.S. and the U.K, offering 31 brands of automobiles. Through its dealerships, the company sells new and used cars and light trucks, arranges related financing, vehicle service and insurance contracts, provides maintenance and repair services and sells replacement parts.

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