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Group 1 Automotive's Investment Plans to Hamper Q1 Results

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Group 1 Automotive, Inc. (GPI - Free Report) announced that its first-quarter 2018 earnings results will be negatively impacted by long-term strategic investments and weak market conditions that include pressurized used car margins. In fourth-quarter 2017, the company reported a year-over-year increase in both earnings per share and revenues.

A recent increase of nearly-new and off-lease used vehicles in the market has put significant pressure on the company margins. This has forced Group 1 Automotive to widen its services and remain competitive by making upfront investments.

Per management, while reviewing its operations, the company realized that used vehicle and aftersales segments are the key elements of their business model, which requires being strengthened in order to stay ahead in the competitive environment.

Group 1 Automotive, Inc. Price and Consensus

The strategic investments, undertaken by Group 1 Automotive to toughen its used vehicle, parts, and service components, including the introduction of Val-U-Line, a brand for high mileage pre-owned vehicles. This new brand will help it to focus on customer demand and lower cost unit that otherwise would have been sent to an auction.

Additionally, to support growth, the company is also investing in aftersales and retention programs to improve dealership employees. Further, it is also making improvements in its service personnel compensation, which includes the rise in fixed component and flexible work schedule to attract and retain service advisors and technicians.

Price Performance

In the last six months, shares of Group 1 Automotive outperformed the industry it belongs to. During the period, the company’s stock gained 9.8% in comparison with the industry’s rise of 4.9%.

Zacks Rank & Other Key Picks

Group 1 Automotive holds a Zacks Rank #2 (Buy). Other top-ranked stocks in the auto space are LKQ Corporation (LKQ - Free Report) , AB Volvo (VLVLY - Free Report) and Toyota Motor Corporation (TM - Free Report) . LKQ Corp and Volvo carry a Zacks Rank of 2, while Toyota sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LKQ Corp has an expected long-term growth rate of 14%. Over a year, shares of the company gained 32.3%.

Volvo has an expected long-term growth rate of 15%. Shares of the company gained 29.6% in the last one year.

Toyota has an expected long-term growth rate of 6.1%. Over a year, shares of the company gained 14.8%.

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