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Group 1 Automotive (GPI) Up 10.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Group 1 Automotive (GPI - Free Report) . Shares have added about 10.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Group 1 Automotive due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Group 1's Q3 Earnings & Sales Beat Estimates, Increase Y/Y

Group 1 reported third-quarter 2022 adjusted earnings per share of $12, beating the Zacks Consensus Estimate of $10.99. The outperformance can be attributed to the higher-than-anticipated profit from the company’s new-vehicle retail, and Parts and Service segments. The bottom line increased 27.1% from the prior-year quarter’s $9.44 per share.

The automotive retailer registered net sales of $4,163.4 million, beating the Zacks Consensus Estimate of $4,069 million. Also, the top line rose 22% from the year-ago quarter’s $3,412.8 million.

Quarter Highlights

New-vehicle retail sales increased 24.4% from the prior-year quarter to $1,883.3 million. The figure, however, lagged the Zacks Consensus Estimate of $1,895 million. The gross profit from the unit totaled $206.7 million, increasing 28% year over year. The reported profit figure surpassed the consensus mark of $197 million.

Used-vehicle retail sales rose 21% from the year-ago period to $1,488.6 million and outpaced the consensus mark of $1,393 million. The gross profit from the unit summed $76 million, shrinking 21.6% year over year. The reported profit figure matched the consensus mark.

Used-vehicle wholesale sales fell 15.5% year over year to $89.6 million and missed the consensus mark of $93 million. The unit recorded a loss of $1.5 million against a profit of $7.4 million reported in the year-ago period. The reported figure significantly lagged the consensus mark of a profit of $1.11 million.

In the Parts and Service business, the top line rose 23.8% from the year-ago quarter’s to $515.6 million. The revenue figure topped the Zacks Consensus Estimate of $505 million. The gross profit for the segment summed $285.1 million, climbing 25.7% year over year and outpacing the consensus mark of $275 million.

Revenues from the Finance and Insurance business improved 27.6% from the prior-year period’s levels to $186.3 million, marginally beating the consensus mark of $186 million. The profit for the segment was break-even in the quarter.

Segments in Detail

In the reported quarter, revenues in the U.S. business segment climbed 30.9% year over year to $3,484.3 million. The segment’s gross profit grew 23.2% to $659.3 million. During the reported quarter, the retail new-vehicle, retail used-vehicle and wholesale used-vehicle units sold were 31,745 , 38,172 and 6,453, respectively.

In the reported period, revenues shrunk 9.5% year over year to $679.1 million for the U.K. business segment. Also, the gross profit summed $93.3 million, down 10% from the year-ago quarter. During the reported quarter, the retail new-vehicle, retail used-vehicle, and wholesale used-vehicle units sold were 7,492, 10,255 and 3,003, respectively.

Financial Position

Selling, general and administrative expenses flared up 20% year over year to $450.9 million. Group 1 Automotive had cash and cash equivalents of $20.5 million as of Sep 30, 2022, up from $14.9 million in 2021-end. Total debt was $1,942.4 million as of Sep 30, 2022, down from $2,035.7 million recorded on Dec 31, 2021.

During the current quarter, GPI repurchased 609,929 shares at an average price of $172.84 per common share for a total of $105.4 million. As of Sep 30, 2022, the company had 15.2 million common shares outstanding.

During the quarter, the company adopted a Rule 10b5-1 trading plan, effective from Oct 3-Oct 19, 2022, under which it repurchased an additional 638,072 shares subsequent to Sep 30, 2022, at an average price of $156.70, for a total amount of $100 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Group 1 Automotive has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Group 1 Automotive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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