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Group 1 (GPI) Actively Focusing on Portfolio Optimization

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Group 1 Automotive (GPI - Free Report) announced the buyout of three dealerships from Holmes European Motors, L.L.C. The acquisition includes Mercedes-Benz, Land Rover, Jaguar, Sprinter and Volvo franchises. The deal involves the purchase of a collision center in Shreveport. With this buyout, Group 1 has expanded its foothold further in the United States. It has added five franchises to its existing Shreveport portfolio of Ford and Lincoln brands. The latest purchase is set to add $110 million to Group1’s total annualized sales.

Group 1’s acquisitions of dealerships and franchises to expand and optimize its portfolio are bolstering the firm’s prospects. In 2021, the company completed transactions representing $2.5 billion of acquired revenues. So far in 2022, Group 1 completed transactions accounting for $660 billion of acquired revenues.

Meanwhile, Group 1 is inking deals to vend dealerships or businesses that do not fit into the company's long-term growth plan. During the second quarter of 2022, the auto retailer disposed of two franchises, including a Hyundai franchise (in Houston) and a Volkswagen franchise (in Boston). The two franchises generated $75 million in annual revenues.

Last week, the company announced its exit from Brazil. In a bid to streamline operations, Group 1 recently concluded the divesture of its operations in Brazil after operating there for nine years. Group 1’s subsidiary GPI SA completed the sale under the share purchase agreement with Original Holdings. UAB Motors Participações — a wholly-owned subsidiary of GPI — was the intervening party. Per the deal, Original acquired all of the issued and equity interests of UAB from Group 1 for BRL 510 million. UAB operated 16 dealerships as of 2021-end and generated BRL 1.7 billion in revenues last year.

The company updated investors regarding its share repurchase activity. From Jan 1 through Jul 5, GPI bought back 1,437,729 shares at an average price of $176.74 for a total of $254.1 million, which depicts 8.3% of Group 1's outstanding share count on Jan 1, 2022. The company’s return on equity (ROE) of 38.4% compares favorably with the industry’s 36% as well as the auto sector’s 10.3%, underscoring management's efficiency in rewarding shareholders.

Zacks Rank & Other Key Picks

Group 1 currently sports a Zacks Rank #1 (Strong Buy). Some other top-ranked auto retailers that you could place your bets on include Lithia Motors (LAD - Free Report) and Penske Automotive (PAG - Free Report) , each flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lithia’s diversified product mix and multiple streams of income reduce its risk profile and position it for sales and profit growth. Its Driveway e-commerce program is helping it to further boost prospects. The firm’s strategic buyouts are fortifying its market share and portfolio. Lithia’s total expected annualized revenues acquired in 2022 so far have reached over $2.1 billion. LAD — being committed to maximizing shareholders’ wealth — increased its dividend in each of the last five years, with an annualized growth rate of 5.70%.

Penske engages in the operation of automotive and commercial truck dealerships in the United States, Canada and Western Europe. The buyout of Kansas City Freightliner, completed during second-quarter 2021, is expected to add $450 million to Penske’s annualized revenues. The McCoy acquisition, completed in November, is expected to bolster the top line of Penske’s PTG subsidiary. In 2021, the company hiked its quarterly dividend four times. So far this year, it has raised its payout twice.

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Penske Automotive Group, Inc. (PAG) - free report >>

Group 1 Automotive, Inc. (GPI) - free report >>

Lithia Motors, Inc. (LAD) - free report >>