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Group 1 Q2 Earnings Beat Estimates - Analyst Blog

Posted
7/29/2013 10:20:00 AM
By: Zacks.com
Referenced Stocks:ABG;AN;GPI;LAD

Group 1 Automotive Inc. ( GPI ) posted a 21.6% rise in earnings per share to $1.52 in the second quarter of 2013 from $1.25 in the prior-year quarter and outpaced the Zacks Consensus Estimate by 11 cents. Net income grew 33.6% to $39.7 million from $29.7 million in the year-ago quarter.

Revenues increased 23.2% year on year to $2.3 billion, beating the Zacks Consensus Estimate of $2.1 billion. The year-over-year improvement was driven by strong performances across its business with higher retail new vehicle sales and better revenues from Finance and insurance business.

Revenues from new vehicle sales escalated 27.3% to $1.4 billion on a 26.1% increase in unit sales to 41,531 vehicles. Revenues from retailed used vehicles improved 17.2% to $534.8 million on a 16.5% increase in unit sales to 25,634 vehicles. Revenues from wholesale used vehicles went up 13.9% to $83.3 million. Used vehicles wholesaled increased 16.3% to 13,072 units.

Revenues from parts and service business scaled up 18.4% to $260.9 million. The company's Finance and insurance business witnessed a 22% rise in revenues to $79.8 million.

Gross profit increased 19.6% to $341.3 million from $285.3 million in the year-ago quarter. Operating income improved 27.8% to $80.6 million from $63.1 million in the second quarter of 2012.

Segment Details

Revenues in the U.S business increased 7.1% to $1.9 billion due to better performance in all the operations and a 3.6% increase in unit sales to 31,868 vehicles. The increase was partially offset by decrease in used vehicle wholesale sales. Gross profit in the segment improved 7.8% to $290.5 million from $269.6 million in the year-ago quarter.

Revenues in the U.K. augmented 50.1% to $207.4 million from $138.2 million due to higher new vehicle retail and used vehicle sales. Gross profit in the segment enhanced 50.5% to $23.7 million from $15.8 million in the year-ago quarter.

Revenues in the Brazil business, which was acquired on Feb this year, was $246.0 million in the quarter. New vehicle retail sales were 5,337 units, while total used vehicle sales were 2,063 units. Gross profit was $27.1 million in the quarter.

Financial Details

Group 1's cash and cash equivalents surged to $10.9 million as of Jun 30, 2013, from $4.7 million as of Dec 31, 2012. Total debt amounted to $242.3 million as of Jun 30, 2013 compared with $263.6 million as of Dec 31, 2012. Debt to capitalization ratio was 19.7% versus 23.5% as of Dec 31, 2012.

Acquisitions

During the quarter, Group 1 Automotive acquired one dealership with estimated annual revenues of approximately $80.0 million. It also disposed four dealerships that generated $176.7 million revenues.

Recently, the company disposed two dealerships, located in Calif., including Miller Nissan, Inc. and Miller Infiniti Inc. These dealerships generated $107.2 million in total revenues.

Our Take

Group 1 Automotive is one of the largest automotive retailers in the U.S., which provides 33 automotive brands. It has 139 automotive dealerships, 178 franchises and 35 collision centers in the U.S., U.K and Brazil. Currently, the company retains a Zacks Rank #2 (Buy).

AutoNation Inc. ( AN ), another prominent automotive retailer in the U.S, posted a 10.6% rise in earnings per share to 73 cents in the second quarter. However, its earnings missed the Zacks Consensus Estimate by a penny.

Revenues increased 13.4% to $4.43 billion, beating the Zacks Consensus Estimate of $4.35 billion. The revenue growth was attributable to strong performance in all business sectors along with higher revenues from retailed used vehicle and Finance and Insurance businesses.

Some other stocks that are performing well in the industry where Group 1 Automotive operates include Asbury Automotive Group, Inc. ( ABG ) and Lithia Motors Inc. ( LAD ). Both the companies carry a Zacks Rank #2 (Buy).



ASBURY AUTO GRP (ABG): Free Stock Analysis Report

AUTONATION INC (AN): Free Stock Analysis Report

GROUP 1 AUTO (GPI): Free Stock Analysis Report

LITHIA MOTORS (LAD): Free Stock Analysis Report

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