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Can These 4 Auto Retailers Beat Q1 Earnings Expectations?
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The first-quarter earnings season for the Auto-Tires-Trucks sector kicked off last week. So far, just one S&P 500 sector component — Genuine Parts (GPC - Free Report) — has reported quarterly numbers. GPC’s earnings not only surpassed expectations but also increased year over year. Revenues lagged estimates but inched up on a yearly basis.
Per the Earnings Trend report dated Apr 17, the auto sector’s earnings for the first quarter of 2024 are expected to decline 29.5% on a year-over-year basis. Revenues are estimated to rise 0.9% year over year.
Leading auto retailers like Group 1 Automotive (GPI - Free Report) , Lithia Motors (LAD - Free Report) , AutoNation (AN - Free Report) and Penske Automotive (PAG - Free Report) are scheduled to release their results this week. Before checking the key projections for these stocks, let's take a look at the general factors that are likely to shape the companies’ upcoming results.
Things to Note
U.S. vehicle sales grew 5.1% to 3.75 million units in the first quarter of 2024, per GlobalData. March's seasonally adjusted annual rate is anticipated to reach 15.5 million units, compared with 15.02 million in March 2023. Per J.D. Power and GlobalData, in March, light-vehicle retail inventory reached 1.7 million, up 4.2% from February 2024 and 39% from March 2023. Total inventory surpassed 2.5 million for the first time since 2021. Per J.D. Power, average transaction prices of vehicles in March declined 3.6% year over year to $44,186.
While sustained demand for vehicles bodes well for auto retailers, the high cost of sales and generous incentives and discounts on various models are expected to have narrowed margins. Amid the rising inventory, automakers and dealers are ramping up incentives and sweetening deals. This surge in incentives reflects a shift toward a buyer's market, placing increased pressure on retailers. While consumers may benefit from lower vehicle prices, dealers might grapple with squeezed profit margins.
Key Predictions for GPI, LAD, AN & PAG
Group 1 is slated to report results on Apr 24, before the opening bell. Over the trailing four quarters, the company topped earnings estimates thrice and missed once.
Our proprietary model indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our proven model does not conclusively predict an earnings beat for GPI this earnings season. This is because it has an Earnings ESP of -1.46% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for the company’s earnings is pegged at $9.52 per share, implying a 12.9% year-over-year decrease. The consensus mark for revenues is pegged at $4.31 billion, indicating an upside of 4.3% from the year-ago reported figure.
Group 1's total acquired revenues in 2023 totaled more than $1 billion. Strategic buyouts and online retailing platform, AcceleRide, are expected to have bouyed revenues in the to-be-reported quarter but the high cost of sales and soaring SG&A expenses are likely to have limited gross and operating margins, respectively.
While we expect the company’s revenues from new vehicle sales to inch up 1.3% to $1.98 billion, our projections imply a year-over-year decline of 6.6% from used vehicle sales. Our forecast for revenues from Parts/Services and Finance/Insurance call for an increase of 7.5% and 7.1%, respectively, on a year-over-year basis.
Lithia is slated to report results on Apr 24, before the opening bell. Over the trailing four quarters, the company topped earnings estimates twice for as many misses.
Our proven model does not conclusively predict an earnings beat for LAD this earnings season. This is because it has an Earnings ESP of -4.74% and a Zacks Rank #3. The Zacks Consensus Estimate for the company’s earnings is pegged at $8.01 per share, implying a 5.1% year-over-year decrease. The consensus mark for revenues is $8.51 billion, suggesting an increase of 22% year over year.
Lithia acquired $3.8 billion in annualized revenues in 2023. Acquisitions and enhanced digital solutions — including the Driveway e-commerce program — are likely to have boosted the company’s revenues in the first quarter of 2024. We expect revenues from LAD’s New Vehicle Retail, Used Vehicle Retail, Used Vehicle Wholesale, Finance/Insurance, Service and Fleet businesses to increase 31.4%, 17.7%, 9.4%. 0.9%,1.7% and 21.9%, respectively, on a year-over-year basis.
However, high cost of sales, escalating SG&A and higher interest obligations due to rising debt will play spoilsport. Also, the company has been incurring losses from financing operations over the past several quarters. The trend is expected to persist in the quarter-to-be reported as well.
AutoNation is slated to report results on Apr 26, before the opening bell. In the trailing four quarters, the company topped earnings estimates on all occasions.
Our proven model does not conclusively predict an earnings beat for AutoNation this earnings season. This is because it has an Earnings ESP of -3.64% and a Zacks Rank #3.
The Zacks Consensus Estimate for the company’s earnings is pegged at $4.45 per share, implying a 26.5% year-over-year decrease. The consensus mark for revenues is $6.48 billion, indicating an upside of 1.3% year over year.
The buyouts of CIG Financial and RepairSmith are expected to boost first-quarter revenues, while rising SG&A as a percentage of gross profit, declining new vehicle margins, high capital expenditure are likely to hurt profits and cash flows.
While we expect the company’s revenues from new vehicle sales to inch up 1.6% to $2.97 billion, our projections imply a year-over-year decline of 1.7% from used vehicle sales. Our forecast for revenues from Parts/Services and Finance/Insurance implies an increase of 7.9% and 13.4%, respectively, on a yearly basis.
Penske is slated to report results on Apr 30, before the opening bell. Over the trailing four quarters, the company topped earnings estimates twice for as many misses.
Our proven model does not conclusively predict an earnings beat for PAG this earnings season. This is because it has an Earnings ESP of -2.87% and a Zacks Rank #4 (Sell). The Zacks Consensus Estimate for the company’s earnings is pegged at $3.35 per share, implying a 22.3% year-over-year decrease. The consensus mark for revenues is $7.45 billion, up 1.6% year over year.
Last year, the company completed acquisitions worth more than $340 million in annualized revenues. While these buyouts are expected to aid revenues, the company is bearing the brunt of rising SG&A expenses amid CarShop expansion, ramp-up of e-commerce activities and introduction of tools and technologies. Discouragingly, Penske anticipates a significant decrease of at least 50% in PTS (Penske Transportation Solutions) earnings in the to-be-reported quarter amid increased interest costs, reduced gains from the sale of used trucks and higher depreciation expenses.
We expect revenues from the Retail Automotive unit to decline 1.5% year over year amid weak used vehicle sales. Our projections for revenues from Retail Commercial Truck also call for a 2.5% contraction year over year. Revenues from the Commercial Vehicle Distribution unit are projected to increase 3.1% year over year.
Image: Bigstock
Can These 4 Auto Retailers Beat Q1 Earnings Expectations?
The first-quarter earnings season for the Auto-Tires-Trucks sector kicked off last week. So far, just one S&P 500 sector component — Genuine Parts (GPC - Free Report) — has reported quarterly numbers. GPC’s earnings not only surpassed expectations but also increased year over year. Revenues lagged estimates but inched up on a yearly basis.
Per the Earnings Trend report dated Apr 17, the auto sector’s earnings for the first quarter of 2024 are expected to decline 29.5% on a year-over-year basis. Revenues are estimated to rise 0.9% year over year.
Leading auto retailers like Group 1 Automotive (GPI - Free Report) , Lithia Motors (LAD - Free Report) , AutoNation (AN - Free Report) and Penske Automotive (PAG - Free Report) are scheduled to release their results this week. Before checking the key projections for these stocks, let's take a look at the general factors that are likely to shape the companies’ upcoming results.
Things to Note
U.S. vehicle sales grew 5.1% to 3.75 million units in the first quarter of 2024, per GlobalData. March's seasonally adjusted annual rate is anticipated to reach 15.5 million units, compared with 15.02 million in March 2023. Per J.D. Power and GlobalData, in March, light-vehicle retail inventory reached 1.7 million, up 4.2% from February 2024 and 39% from March 2023. Total inventory surpassed 2.5 million for the first time since 2021. Per J.D. Power, average transaction prices of vehicles in March declined 3.6% year over year to $44,186.
While sustained demand for vehicles bodes well for auto retailers, the high cost of sales and generous incentives and discounts on various models are expected to have narrowed margins. Amid the rising inventory, automakers and dealers are ramping up incentives and sweetening deals. This surge in incentives reflects a shift toward a buyer's market, placing increased pressure on retailers. While consumers may benefit from lower vehicle prices, dealers might grapple with squeezed profit margins.
Key Predictions for GPI, LAD, AN & PAG
Group 1 is slated to report results on Apr 24, before the opening bell. Over the trailing four quarters, the company topped earnings estimates thrice and missed once.
Our proprietary model indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our proven model does not conclusively predict an earnings beat for GPI this earnings season. This is because it has an Earnings ESP of -1.46% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for the company’s earnings is pegged at $9.52 per share, implying a 12.9% year-over-year decrease. The consensus mark for revenues is pegged at $4.31 billion, indicating an upside of 4.3% from the year-ago reported figure.
Group 1's total acquired revenues in 2023 totaled more than $1 billion. Strategic buyouts and online retailing platform, AcceleRide, are expected to have bouyed revenues in the to-be-reported quarter but the high cost of sales and soaring SG&A expenses are likely to have limited gross and operating margins, respectively.
While we expect the company’s revenues from new vehicle sales to inch up 1.3% to $1.98 billion, our projections imply a year-over-year decline of 6.6% from used vehicle sales. Our forecast for revenues from Parts/Services and Finance/Insurance call for an increase of 7.5% and 7.1%, respectively, on a year-over-year basis.
Lithia is slated to report results on Apr 24, before the opening bell. Over the trailing four quarters, the company topped earnings estimates twice for as many misses.
Our proven model does not conclusively predict an earnings beat for LAD this earnings season. This is because it has an Earnings ESP of -4.74% and a Zacks Rank #3. The Zacks Consensus Estimate for the company’s earnings is pegged at $8.01 per share, implying a 5.1% year-over-year decrease. The consensus mark for revenues is $8.51 billion, suggesting an increase of 22% year over year.
Lithia acquired $3.8 billion in annualized revenues in 2023. Acquisitions and enhanced digital solutions — including the Driveway e-commerce program — are likely to have boosted the company’s revenues in the first quarter of 2024. We expect revenues from LAD’s New Vehicle Retail, Used Vehicle Retail, Used Vehicle Wholesale, Finance/Insurance, Service and Fleet businesses to increase 31.4%, 17.7%, 9.4%. 0.9%,1.7% and 21.9%, respectively, on a year-over-year basis.
However, high cost of sales, escalating SG&A and higher interest obligations due to rising debt will play spoilsport. Also, the company has been incurring losses from financing operations over the past several quarters. The trend is expected to persist in the quarter-to-be reported as well.
AutoNation is slated to report results on Apr 26, before the opening bell. In the trailing four quarters, the company topped earnings estimates on all occasions.
Our proven model does not conclusively predict an earnings beat for AutoNation this earnings season. This is because it has an Earnings ESP of -3.64% and a Zacks Rank #3.
The Zacks Consensus Estimate for the company’s earnings is pegged at $4.45 per share, implying a 26.5% year-over-year decrease. The consensus mark for revenues is $6.48 billion, indicating an upside of 1.3% year over year.
The buyouts of CIG Financial and RepairSmith are expected to boost first-quarter revenues, while rising SG&A as a percentage of gross profit, declining new vehicle margins, high capital expenditure are likely to hurt profits and cash flows.
While we expect the company’s revenues from new vehicle sales to inch up 1.6% to $2.97 billion, our projections imply a year-over-year decline of 1.7% from used vehicle sales. Our forecast for revenues from Parts/Services and Finance/Insurance implies an increase of 7.9% and 13.4%, respectively, on a yearly basis.
Penske is slated to report results on Apr 30, before the opening bell. Over the trailing four quarters, the company topped earnings estimates twice for as many misses.
Our proven model does not conclusively predict an earnings beat for PAG this earnings season. This is because it has an Earnings ESP of -2.87% and a Zacks Rank #4 (Sell). The Zacks Consensus Estimate for the company’s earnings is pegged at $3.35 per share, implying a 22.3% year-over-year decrease. The consensus mark for revenues is $7.45 billion, up 1.6% year over year.
Last year, the company completed acquisitions worth more than $340 million in annualized revenues. While these buyouts are expected to aid revenues, the company is bearing the brunt of rising SG&A expenses amid CarShop expansion, ramp-up of e-commerce activities and introduction of tools and technologies. Discouragingly, Penske anticipates a significant decrease of at least 50% in PTS (Penske Transportation Solutions) earnings in the to-be-reported quarter amid increased interest costs, reduced gains from the sale of used trucks and higher depreciation expenses.
We expect revenues from the Retail Automotive unit to decline 1.5% year over year amid weak used vehicle sales. Our projections for revenues from Retail Commercial Truck also call for a 2.5% contraction year over year. Revenues from the Commercial Vehicle Distribution unit are projected to increase 3.1% year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar