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Group 1 Automotive (GPI) Rides on Dealership Expansions

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On May 23, we issued an updated research report on Group 1 Automotive, Inc. (GPI - Free Report) .

The company regularly acquires and divests dealerships, and franchises to expand its business. In April 2018, Group 1 Automotive acquired a new Toyota sales territory in western Sao Paulo, Brazil. Additionally, the company expanded an existing Honda dealership at Sao Bernardo do Campo in the suburbs of Sao Paulo. In first-quarter 2018, the company acquired five dealerships in the United Kingdom and two dealerships in the United States. In 2017, it acquired 12 dealerships in the United Kingdom, representing 14 franchises. These expansion efforts are likely to boost the company’s annualized revenues.

In order to boost shareholder value, Group 1 Automotive pursues different capital-deployment strategies. Group 1 Automotive’s financial position has been improving with higher cash balance.

In first-quarter 2018, Group 1 Automotive reported earnings per share of $1.70, surpassing both the Zacks Consensus Estimate and the prior-year quarter figure. Results were aided by a solid U.S. performance in March and gains from the new tax law.

Also, the company’s revenues were higher than both the Zacks Consensus Estimate and the prior-year quarter figure.

However, Group 1 Automotive results are negatively impacted by long-term strategic investments and weak market conditions that include pressurized used-car margins. A recent increase of nearly-new and off-lease used vehicles in the market has put significant pressure on the company margins.

In the past three months, shares Group 1 Automotive have underperformed the industry it belongs to. Its shares have decreased 8.1% compared with the industry’s decline of 3.3%.

Group 1 Automotive currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked stocks in the auto space are Oshkosh Corporation (OSK - Free Report) , Ferrari N.V. (RACE - Free Report) and Gentex Corporation (GNTX - Free Report) . While Oshkosh and Ferrari sport a Zacks Rank #1, Gentex carries a Zacks Rank #2 (Buy).

Oshkosh has an expected long-term growth rate of 18.3%. Shares of the company have risen 21.1% over the past year.

Ferrari has an expected long-term growth rate of 17.3%. Over the past year, shares of the company have gained 54.3%.

Gentex has an expected long-term growth rate of 13%. In a year’s time, shares of the company have gained 28.6%.

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