Earnings quotes have actually been skyrocketing for Group 1 Automotive (GPI – Expert Report) after the company rendered strong Q4 results on February 5. Both revenues and revenues easily surpassed the Zacks Agreement Estimates due to strength in both new and secondhand automobile sales, as well as broadening profit margins.
Group 1 is a Zacks Rank # 1 (Strong Buy) stock. The evaluation photo looks very reasonable too with shares trading at 12x forward earnings and 0.2 x sales.
Group 1 Automotive has and operates 150 automobile dealerships, 195 franchises, and 38 collision centers in the United States, the United Kingdom and Brazil. The business offers brand-new and secondhand vehicles and light trucks, arranges relevant car funding, offers service and insurance contracts, supplies vehicle upkeep and repair servicerepair and maintenance services and sells automobile parts.
In 2014, the companys revenue was divided as follows:
New Automobile Sales: 58 %.
Utilized Vehicle Sales: 27 %.
Parts amp; Service: 11 %.
Finance, Insurance amp; Other: 4 %.
Interestingly, while Components amp; Service made up simply 11 % of overall revenue last year, it accounted for 41 % of overall gross revenue due to considerably greater margins than in both new and used automobile sales.
4th Quarter Results.
Group 1 rendered better-than-expected fourth quarter results on February 5. Adjusted incomes per share was available in at $1.67, squashing the Zacks Agreement Estimate of $1.31. It was a 55 % increase over the very same quarter last year.
Overall income rose 11 % year-over-year to $2.539 billion, beating the agreement of $2.479 billion. New automobile profits increased 9.9 % on 8.4 % higher device sales. New vehicle gross revenue increased 4.4 % per unit to $1,973. Retail used automobile earnings jumped 15.6 % due to a 15.1 % increase in device sales. And Parts amp; Service income rose 9.5 %.
In general, the adjusted operating margin enhanced 60 basis points to 3.5 %.
Following strong Q4 outcomes, experts modified their estimates substantially greater for Group 1. This sent out the stock to a Zacks Rank # 1 (Strong Buy).
The 2015 Zacks Agreement Quote enhanced from $6.49 before the report to $6.80. The 2016 consensus increased from $7.09 to $7.58 over the very same period.
Group 1 is not the only auto seller seeing positive estimate revisions nowadays. In truth, the Retail/Wholesale Auto/Truck market ranks in the top 10 from 265 industries that Zacks ranks based upon profits momentum.
Other car merchants like Asbury Car Group (ABG – Snapshot Report), AutoNation (AN – Analyst Report), Lithia Motors (LAD – Analyst Report), and Sonic Automotive (SAH – Photo Report) all sport either a Zacks Rank of 1 (Strong Buy) or 2 (Buy).
Among the factors for this has been the strong rebound in new car sales from the depths of the Great Recession.
The valuation picture looks affordable for Group 1. Shares trade at 12x 12-month forward incomes, a discount to the market typical of 13x. Its price to sales ratio of 0.2 is likewise below the market average of 0.3.
The Bottom Line.
With favorable industry trends, increasing revenues estimates and reasonable evaluation, Group 1 Automotive offers financiers a lot to like.
Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research study and Editor of the Earnings Plus Investor and Surprise Trader services.