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The Zacks Analyst Blog Highlights: AutoNation, Penske, Automotive and Lithia

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For Immediate Release

Chicago, IL – May 3, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include AutoNation, Inc. (AN - Free Report) , Penske Automotive Group, Inc. (PAG - Free Report) , Automotive Group, Inc. (ABG - Free Report) and Lithia Motors, Inc. (LAD - Free Report) .

Here are highlights from Thursday’s Analyst Blog:

Auto Retail, Wholesale Near-Term Prospects Bright

The performance of automotive sector depends upon its retail and wholesale network. Through dealership and retail chains, companies in the Zacks Auto Retail and Wholesale industry carry out several tasks. These include sale of new and used vehicles and light trucks,  sale of auto parts, execution of repair and maintenance services, and arrangement of vehicle financing.

The industry comprises prominent companies such as AutoNation, Inc., Penske Automotive Group, Inc., Automotive Group, Inc., Lithia Motors, Inc. and others.

Let’s take a look at the industry’s three major themes:

·         The Auto Retail & Whole Sales industry is witnessing considerable changes in the operating environment. Wide usage of technology, rapid digitalization and shift toward electric and self-driving vehicles have made it necessary for the industry players to reorient their business model.

·         The space has some distinct advantages in the form of rising consumer disposable income, a better employment scenario and easy availability of credit. It is anticipated that industry revenues with an increase in the number of consumers entering the market.

·         High interest rate is an overhang on the industry, particularly on independent dealers. Added to this, concerns pertaining to tariffs have worsened the situation.

Zacks Industry Rank Indicates Solid Prospects

The Zacks Auto Retail & Wholesale industry is a nine-stock group within the broader Zacks Auto sector. The industry currently carries a Zacks Industry Rank #23, which places it in the top 9% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate.

Before we present a few Auto Retail & Wholesale stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Underperforms S&P 500 But Outperforms Sector

Over the past year, the Auto Retail & Wholesale industry has underperformed the Zacks S&P 500 composite but outperformed its own sector.

Over this period, the industry has gained 3.2% against the sector’s decline of 13.7%. The Zacks S&P 500 composite has increased 11.3% in the same time frame.

Industry’s Current Valuation

On the basis of trailing 12-month enterprise value-to EBITDA (EV/EBITDA), which is a commonly used multiple for valuing auto stocks, the industry is currently trading at 7.01X compared with the S&P 500’s 11.29X and the sector’s trailing-12-month EV/EBITDA of 9.21X.

Over the past five years, the industry has traded as high as 9.82X, as low as 6.25X and at a median of 8.02X.

Bottom Line

Analysis shows that there are certain bright spots such as a decent industry rank and cheap valuation for the Zacks Auto Retail & Wholesale industry. Also, a robust economy and conducive labor market conditions are positives.

However, embracing radical changes such as occasional launch of new models, and introduction of electric and autonomous vehicles is a challenge.

A couple of stocks in the Auto Retail & Wholesale industry space currently carrying a Zacks Rank #1 (Strong Buy) are Group 1 Automotive, Inc. (GPI) and Lithia Motors . You can see the complete list of today’s Zacks #1 Rank stocks here.

Group 1 Automotive: The Zacks Consensus Estimate for current-year earnings of this company has increased 6% to $9.68 per share over the past 30 days.
 
Lithia Motors: The Zacks Consensus Estimate for current-year earnings of this company has increased 7% to $10.96 per share over the past 30 days.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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