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Group 1 Automotive (GPI) Up 8.4% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Group 1 Automotive, Inc. (GPI - Free Report) . Shares have added about 8.4% in that time frame.

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

Group 1 Automotive Beats on Q1 Earnings & Revenues

Group 1 Automotive reported earnings per share of $1.70 in first-quarter 2018, beating the Zacks Consensus Estimate of $1.56. The bottom line substantially improved from the prior-year quarter’s figure of $1.58. Results were aided by solid U.S. performance in March and gains from the new tax law.
 
The company recorded net income of $35.8 million compared with $33.9 million in the year-ago quarter. Revenues of $2.86 billion increased 13.5% year over year and surpassed the Zacks Consensus Estimate of $2.63 billion.

Revenues from new-vehicle retail sales increased 13.2% to $1.51 billion, owing to 7.6% rise in unit sales. The same from retailed used vehicles grew 18.1% to $780.6 million on 14.7% increase in unit sales. However, the metric from wholesale used-vehicle sales declined 0.1% to $104 million.

At the Parts and Service business, the top line improved 9.3% to $349.5 million. Also, the company’s Finance and Insurance business witnessed 16% gain in revenues to $112.3 million.

Gross profit was up 9.4% year over year to $419.8 million. Operating income declined 1.3% to $79 million.

Segment in Details

On a same-store basis, revenues in the U.S. business segment rose 4.2% to $2 billion. The segment recorded 4.9% growth in new-vehicle retail sales to $1.07 billion and an .3% fall in total used-vehicle sales to $34.5 million. Parts and Service revenues increased 3.4% while Finance and Insurance revenues rose 10.3%.

Revenues, on a same-store basis, increased 12.7% year over year to $504.2 million at the U.K. business segment. Retail new-vehicle sales improved 5.2% to $270.1 million and total used-vehicle sales rallied 25.5% to $182.3 million. Parts and Service revenues improved 13.1% while Finance and Insurance revenues rose 18.5%.

On a same-store basis, revenues in the Brazil business segment rose 15.8% year over year to $111 million in the reported quarter. New-vehicle retail sales gained 19.2% to $69.2 million while total used-vehicle sales rose 12.6% to $28 million. Parts and Service revenues increased 6.9% while Finance and Insurance revenues soared 4.6%.

Financial Details

Group 1 Automotive’s cash and cash equivalents increased to $33.1 million as of Mar 31, 2018, from $28.8 million as of Dec 31, 2017.

Share Repurchases

In first-quarter 2018, Group 1 Automotive repurchased 135,605 outstanding shares. As of Apr 26, 2018, the company had $40.4 million, remaining under the share repurchase authorization.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.

Group 1 Automotive, Inc. Price and Consensus

VGM Scores

At this time, GPI has a nice Growth Score of B, however its Momentum is doing a bit better with an A. 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.

Based on our scores, the stock is more suitable for value and momentum investors than growth investors.

Outlook

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




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