Group 1 Automotive (GPI) Up 8.8% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·4-min read

A month has gone by since the last earnings report for Group 1 Automotive (GPI). Shares have added about 8.8% in that time frame, outperforming 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's Q4 Profit & Sales Lag Estimates

Group 1 reported adjusted earnings per share of $5.66 for fourth-quarter 2020, missing the Zacks Consensus Estimate of $5.84. This underperformance primarily stemmed from lower-than-anticipated gross profit from Used Vehicle Retail, Parts & Services and Finance & Insurance units. Nonetheless, the bottom line surged 88% year over year. The automotive retailer reported net sales of $2,990.2 million, lagging the Zacks Consensus Estimate of $3,022 million. The top-line figure also dipped 3.8% year over year.  

Q4 Highlights

New-vehicle retail sales declined 5.1% from the prior-year quarter to $1,595.3 million and lagged the Zacks Consensus Estimate of $1,710 million. However, gross profit from the unit totaled $104.6 million, up 24.1% year over year. 

Used-vehicle retail sales tailed off 2.5% from the year-ago quarter to $818.2 million. Used-vehicle wholesale sales scaled up 5.4% from the corresponding quarter last year to $86.2 million. Gross profit from used-vehicle retail sales and used-vehicle wholesale sales amounted $49.2 million and $2 million, missing the consensus mark of $55 million and $4 million, respectively.

For the Parts and Service business, the top line slid 4.8% from the year-ago period to $361.2 million and lagged the Zacks Consensus Estimate of $375 million. Gross profit from the segment summed $196.6 million, falling shy of the consensus mark of $202 million. Revenues from the Finance and Insurance business contracted 0.3% from the prior-year period to $129.3 million, missing the consensus mark of $131 million. Segmental gross profit of $129.3 missed the consensus estimate of $131 million.

Segments in Detail

For the reported quarter, revenues in the U.S. business segment totaled $2,420.1 million, almost unchanged from the year-ago level. The segment’s gross profit increased 5.4% year over year to $404.9 million. For the September-end quarter, retail new-vehicle, used-vehicle, and wholesale used-vehicle units sold were 30,610, 26,917 and 6,307, respectively.

Revenues dwindled 12.3% year over year to $501.9 million for the U.K. business segment. Gross profit summed $66.2 million, flat with the year-ago quarter. For the reported quarter, retail new-vehicle, used-vehicle, and wholesale used-vehicle units sold were 6,260, 6,926 and 4,134, respectively.

Revenues for the Brazil business segment plummeted 42.7% year over year to $68.2 million for the fourth quarter. The segment’s gross profit also plunged 23.6% year over year to $10.6 million. For the reported quarter, retail new-vehicle, used-vehicle and wholesale used-vehicle units sold were 1,650, 610 and 375, respectively.

Financial Position

During the quarter under review, the company bought back 265,808 shares at an average price of $117.66 per share. Group 1 Automotive had cash and cash equivalents of $87.3 million as of Dec 31, 2020, up from $23.8 million in the corresponding period of 2019. Long-term debt totaled $1,294.7 million as of Dec 31, 2020, down from $1,432.1 million recorded in the comparable period of 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -6.46% due to these changes.

VGM Scores

At this time, Group 1 Automotive has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. 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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