Group 1 Automotive (GPI) Up 0.6% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Group 1 Automotive (GPI). Shares have added about 0.6% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Group 1 Q4 Earnings Miss Estimates, Revenues Beat

Group 1 reported fourth-quarter 2023 adjusted earnings per share of $9.50, missing the Zacks Consensus Estimate of $10.49. The bottom line also decreased from the prior-year quarter’s earnings of $10.86 per share. The automotive retailer registered net sales of $4.48 billion, beating the Zacks Consensus Estimate of $4.38 billion. Also, the top line rose from the year-ago quarter’s $4.07 billion.

Quarter Highlights

New vehicle retail sales increased 17.2% from the prior-year quarter to $2.3 billion and exceeded our projection of $2.13 billion on the back of higher-than-expected volumes and average selling prices. Total retail new vehicles sold were 45,827 units, increasing 14.8% year over year and surpassing our forecast of 42,689 units on improving inventory levels and robust demand despite the high costs of vehicle financing. Average selling price per unit was $50,760, up 2.7% year over year. The gross profit from the new vehicle retail unit totaled $184.5 million, decreasing 11.1% year over year.

Used-vehicle retail sales inched up 1.1% from the year-ago period to $1.33 billion and outpaced our forecast by $1.3 billion on higher-than-expected average selling prices. Total retail used vehicles sold were 44,656 units, up 2.5% year over year but below our expectation of 44,979 units. Average selling price per unit came in at $29,884, down 1.3% year over year. However, the metric exceeded our expectation of $27,515 million.  The gross profit from the unit was $64.1 million, rising 6.1% year over year.

Used-vehicle wholesale sales rose 19.3% year over year to $102.3 million and beat our expectation of $91.7 million. The unit recorded a gross loss of $4.3 million, widening from $2.1 million incurred in the year-ago period. In the Parts and Service business, the top line rose 5.1% from the year-ago quarter to $545 million and gross profit increased 6.5% year over year to $299.3 million. Revenues from the Finance and Insurance (F&I) business came in at $187.1 million, up 8.4% from the year-ago period levels.

Segments in Detail

In the reported quarter, revenues from the U.S. business segment climbed 10.5% year over year to $3.77 billion and exceeded our forecast of $3.55 billion, largely on solid sales of new vehicles. The segment’s gross profit grew 2.3% to $640.2 million and came ahead of our prediction by $5 million. During the reported quarter, retail new-vehicle, retail used-vehicle and wholesale used-vehicle units sold were 38,152, 35,195 and 8,160, respectively.

In the reported period, revenues rose 8.1% year over year to $707.5 million for the U.K. business segment, falling short of our estimate of $713 million due to lower-than-expected sales of new vehicles. Gross profit was $90.5 million, down 3.4% from the year-ago quarter and missing our projection of $96.4 million. During the reported quarter, the retail new-vehicle, retail used-vehicle and wholesale used-vehicle units sold were 7,675, 9,461 and 2,996, respectively.

Financial Position

Selling, general and administrative expenses were up 7.4% year over year to $487.4 million. Group 1 had cash and cash equivalents of $57.2 million as of Dec 31, 2023, up from $47.9 million as of 2022-end. Total debt was $2.1 billion as of Dec 31, 2023, up from $2.08 million recorded on Dec 31, 2022.

During the quarter under discussion, GPI repurchased 160,968 shares at an average price of $262.25 per common share for a total of $42.2 million. The company currently has $143.3 million remaining on its authorized stock buyback program.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 11.61% due to these changes.

VGM Scores

Currently, Group 1 Automotive has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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