Group 1: Earnings Performance - Asbury Automotive Group reported quarterly earnings of $7.17 per share, exceeding the Zacks Consensus Estimate of $6.8 per share, and up from $6.35 per share a year ago, representing an earnings surprise of +5.44% [1] - The company posted revenues of $4.8 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.37%, compared to year-ago revenues of $4.24 billion [2] Group 2: Stock Performance and Outlook - Asbury Automotive shares have declined approximately 3.6% since the beginning of the year, while the S&P 500 has gained 16.9% [3] - The current consensus EPS estimate for the upcoming quarter is $6.65 on revenues of $4.87 billion, and for the current fiscal year, it is $27.31 on revenues of $18.09 billion [7] Group 3: Industry Context - The Automotive - Retail and Whole Sales industry is currently ranked in the bottom 23% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Record third quarter 2025 net income of $147 million ($7.52 per diluted share), up 16% from $126 million ($6.37 per diluted share) in Q3 2024[2] - Adjusted net income for Q3 2025 was $140 million ($7.17 per diluted share), an increase of 11% from $126 million ($6.35 per diluted share) in Q3 2024[2][5] - Net income for Q3 2025 reached $147.1 million, a 16% increase from $126.3 million in Q3 2024[25] - Diluted EPS for the three months ended September 30, 2025, was $7.52, compared to $6.37 in the same period of 2024, representing a growth of 18.1%[40] - For the nine months ended September 30, 2025, net income was $432.0 million, a decrease of 45.8 million compared to the previous year[41] - Diluted EPS for the same period was $21.99, down from $23.74, reflecting a decrease of 1.75[41] Revenue Growth - Total revenue reached $4.8 billion, representing a growth of 13% year-over-year[5] - Total revenue for Q3 2025 was $4,800.9 million, a 13% increase from $4,236.7 million in Q3 2024[25] - New vehicle revenue increased by 17% to $2,528.9 million in Q3 2025, compared to $2,163.5 million in Q3 2024[25] - Used vehicle retail revenue grew by 7% to $1,226.8 million in Q3 2025, while wholesale revenue surged by 27% to $185.5 million[25] - Total revenue for the three months ended September 30, 2025, was $4,800.9 million, a 13% increase from $4,236.7 million in 2024[31] - New vehicle revenue reached $2,528.9 million, up 17% from $2,163.5 million year-over-year[31] Profitability Metrics - Gross profit for Q3 2025 was $803 million, a 12% increase compared to the previous year[5] - Total gross profit for the company remained stable at 100.0% year-over-year[29] - Total gross profit increased to $802.5 million, a 12% rise compared to $718.0 million in the same period last year[31] - Parts and service gross profit rose by 15% to $389.1 million, compared to $337.1 million in 2024[31] - The company reported a total gross profit margin of 16.7%, slightly down from 16.9% year-over-year[31] Operating Expenses - Operating expenses for the quarter were $527.1 million, a 13% increase from $466.5 million in the same quarter last year[31] - Operating expenses increased by 2% to $453.8 million in Q3 2025, compared to $445.2 million in Q3 2024[33] - Selling, general and administrative (SG&A) expenses for the nine months ended September 30, 2025, were $1,458.9 million, representing 64.0% of gross profit[41] - The company reported a decrease in SG&A as a percentage of gross profit from 64.2% in 2024 to 64.0% in 2025[41] Liquidity and Debt - The company had $687 million in total liquidity as of September 30, 2025[9] - Long-term debt increased to $3,605.3 million as of September 30, 2025, from $3,138.6 million at the end of 2024[26] - Adjusted long-term net debt for September 30, 2025, was $3,467.1 million, compared to $2,403.7 million in 2024[39] - The transaction adjusted net leverage ratio was 3.2x at the end of the quarter[9] - The adjusted leverage ratio as of September 30, 2025, was 3.2, compared to 2.5 in the previous year[39] Share Repurchase and Inventory - Approximately 220,500 shares were repurchased for $50 million during Q3 2025, with $226 million remaining on the share repurchase authorization[11] - Inventory increased to $2,318.9 million as of September 30, 2025, up from $1,978.8 million at the end of 2024[26] - Days supply of new vehicle inventory was 58 days as of September 30, 2025, compared to 72 days in the same period of 2024[27] Vehicle Sales and Market Performance - New vehicle unit volume increased by 13%, with new vehicle revenue rising by 17% and gross profit increasing by 7%[10] - Used vehicle retail sales grew by 25.6% compared to the same period last year[29] - Domestic vehicle sales represented 27% of total sales, a decrease from 29% in the previous year[29] - The used to new vehicle sales ratio decreased to 78.4% from 87.7% year-over-year[31] - The used to new vehicle sales ratio was 79.5% in Q3 2025, down from 88.4% in Q3 2024[33]

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Core Insights - New vehicle sales remained strong in Q3 2025, driven by electric vehicle (EV) sales, but affordability issues and the expiration of EV tax credits may impact future demand [1][4] - The Federal Reserve's rate cuts are expected to gradually lower auto financing costs, providing relief to buyers and retailers [1][5] - Leading players are leveraging digitization, strategic acquisitions, cost management, and shareholder-friendly actions to maintain competitiveness [1][6][7][8] Industry Overview - The auto retail and wholesale industry is crucial for delivering vehicles and parts to consumers, operating through dealership networks and retail chains [3] - Economic conditions significantly influence the industry's performance, with consumer spending on vehicles typically increasing during economic upturns and declining during downturns [3] - The COVID-19 pandemic accelerated the industry's shift towards online tools and e-commerce, a trend expected to continue [3] Key Themes - Vehicle sales are anticipated to soften as EV demand cools and affordability issues persist, with average vehicle prices exceeding $50,000 [4][5] - The Federal Reserve's interest rate cuts may help lower auto loan costs, potentially bringing buyers back into the market [5] - Auto retailers are pursuing strategic acquisitions to expand their market reach and improve operational efficiency [6] Digitization and Customer Experience - Dealers are investing in digital platforms to enhance the buying experience, which is crucial for maintaining competitiveness in a tech-savvy market [7] - The shift towards digitization is expected to broaden customer reach and improve margins [7] Investor-Friendly Actions - Several auto retailers are committed to rewarding shareholders through buybacks and dividend increases, supported by healthy cash flow from acquisitions and cost-efficiency programs [8] Industry Performance - The Zacks Auto Retail & Wholesale industry ranks 18, placing it in the top 7% of around 245 Zacks industries, indicating positive near-term prospects [9][10] - The industry has underperformed the S&P 500 and the broader Auto, Tires, and Truck sector over the past year, returning 8.2% compared to the S&P 500's 14.7% and the sector's 40.8% [12] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 8.5X, significantly lower than the S&P 500's 18.12X and the sector's 22.41X [15] - Historical trading ranges for the industry have been between 4.78X and 10.79X over the past five years [16] Company Highlights - Asbury Automotive is expanding rapidly through acquisitions and digital innovation, with a projected annualized sales increase of around $3 billion from recent deals [19][20] - Sonic Automotive's balanced business model supports steady profitability, with significant growth expected from its EchoPark used car segment [23][24] - Penske Automotive is expanding its global footprint and maintaining a strong balance sheet, with a low debt-to-capital ratio of 14% [27][28][29] - AutoNation is enhancing its digital capabilities and expanding through acquisitions, with a focus on strengthening its market presence [32][33]

Core Insights - LRT Capital Management's "LRT Global Opportunities Strategy" reported a net return of -8.00% for September 2025 and a year-to-date return of -0.17%, indicating a challenging month amid a market surge driven by overvalued mega-cap stocks [1] Company Overview - Asbury Automotive Group, Inc. (NYSE:ABG) is highlighted as a premier operator and strategic consolidator in the U.S. automotive retail sector, managing a diverse portfolio of dealerships [3] - The company offers a comprehensive range of services, including new and used vehicle sales, financing, insurance products, and parts and service operations [3] Performance Metrics - Asbury Automotive Group, Inc. experienced a one-month return of -2.69% and an annual gain of 8.08% over the last 52 weeks, with its stock closing at $247.51 on October 6, 2025, and a market capitalization of $4.866 billion [2]

Core Viewpoint - Asbury Automotive Group (ABG) has received a Zacks Rank 2 (Buy) upgrade, indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Ratings - The Zacks rating system is primarily based on a company's changing earnings picture, tracking the Zacks Consensus Estimate for EPS from sell-side analysts [2]. - The Zacks rating upgrade for Asbury Automotive reflects an optimistic earnings outlook, likely leading to increased buying pressure and a rise in stock price [4][6]. Impact of Earnings Estimate Revisions - Changes in a company's future earnings potential, as shown by earnings estimate revisions, are strongly correlated with near-term stock price movements, particularly due to institutional investors' reliance on these estimates for fair value calculations [5]. - Rising earnings estimates and the subsequent rating upgrade for Asbury Automotive suggest an improvement in the company's underlying business, which should encourage investors to drive the stock price higher [6]. Zacks Rank System - The Zacks Rank stock-rating system categorizes stocks into five groups based on four earnings estimate-related factors, with a strong historical performance, particularly for Zacks Rank 1 stocks which have averaged a +25% annual return since 1988 [8]. - The upgrade of Asbury Automotive to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [11]. Earnings Estimate Revisions for Asbury Automotive - For the fiscal year ending December 2025, Asbury Automotive is expected to earn $27.39 per share, unchanged from the previous year, but the Zacks Consensus Estimate has increased by 2.2% over the past three months [9].

Monetary Policy and Economic Outlook - The U.S. Federal Reserve cut interest rates by 25 basis points for the first time this year, indicating a shift towards monetary easing and expecting two more cuts by year-end [1][9] - Despite inflation remaining above the 2% target, the increase in the unemployment rate has pressured policymakers to focus on supporting economic growth [2] - The Fed has raised its projections for economic growth this year, with expectations for higher growth next year [2] Investment Opportunities - Investors are encouraged to design their portfolios to capitalize on the improving economic scenario, with broker-adored stocks such as CVR Energy (CVI), Asbury Automotive Group (ABG), American Axle & Manufacturing Holdings (AXL), General Motors Company (GM), and Adient plc (ADNT) highlighted for potential returns [3][9] - A screening process has been developed to shortlist stocks based on improving analyst recommendations, upward estimate revisions, and low price/sales ratios [4][5] Stock Screening Criteria - The screening parameters include net upgrades in analyst ratings over the last four weeks, earnings estimate revisions, and a focus on companies with lower price/sales ratios [5][6] - Additional criteria include a current price greater than $5, an average daily volume exceeding 100,000 shares over the last 20 trading days, and a market value in the top 3000 stocks by market capitalization [6] Company Profiles - CVR Energy is involved in renewable energy and petroleum refining, committed to developing renewable biofuels [7] - Asbury Automotive Group has a diversified product mix and is leveraging its e-commerce platform, Clicklane, for growth [8][10] - American Axle is advancing in the electric drive space, enhancing its market position through collaborations [11][12] - General Motors remains the top-selling U.S. automaker, driven by strong demand for its vehicles and a robust electrification strategy [13][14] - Adient is a leading automotive seating supplier with a diverse customer base and strong market presence [14][15]

Group 1 - Asbury Automotive Group Inc shares have crossed below their 200-day moving average of $224.07, trading as low as $223.46 per share, indicating a decline of approximately 2.8% on the day [2] - The 52-week range for Asbury Automotive Group Inc shares is between a low of $178.395 and a high of $277.13, with the last trade recorded at $221.89 [2]

Core Insights - The Bonhoeffer Fund focused on selling slower-growth firms and acquiring durable, faster-growing companies in depressed sectors, aligning with long-term growth themes such as consolidation and financial compounders [7][11] - The fund achieved a net gain of 8.7% in Q2 2025, underperforming compared to the MSCI World ex-US and S&P 500, which returned 12.1% and 10.8% respectively [9][10] - The portfolio's projected earnings/free cash flow growth is approximately 16%, with a weighted average earnings/free cash flow yield of 12.5% [10][11] Investment Themes - **Distribution (49% of Portfolio)**: The fund holds high-velocity distributors in various markets, focusing on car dealerships and building product distributors, which have shown a quarterly performance of 6% [14] - **Real Estate/Construction/Finance (58% of Portfolio)**: Investments in construction firms are expected to benefit from government infrastructure programs and affordable housing financing, with banks showing sustainable ROEs and EPS growth rates above 15% [18][19] - **Public Leverage Buyouts (31% of Portfolio)**: The strategy involves growth through acquisitions, with firms like Builders First Source (BFS) utilizing local economies of scale to generate high returns [22][24] - **Compound Mispricings (15% of Portfolio)**: Investments in Korean preferred stocks and Asian real estate are characterized by governance improvements and liquidity, with Vistry facing challenges but still focusing on affordable housing [31][32] - **Telecom/Transaction Processing (3% of Portfolio)**: Companies like Millicom are positioned to benefit from reduced competition and favorable market conditions, with a focus on cost-cutting and dividend yields [33][35] - **Consumer Products (3% of Portfolio)**: Defensive consumer product firms are expected to perform well, with Academy Sports facing challenges but retaining potential for recovery [36][37] Financial Metrics - The Bonhoeffer Fund's portfolio has an average EV/EBITDA of 3.2 and a growth rate of 16% [9][10] - Arrow Electronics is projected to have a 27% EPS growth rate through 2029, with a future share price estimated at $39 [17] - Builders First Source (BFS) is expected to see a recovery in share price with a projected value of around $505 per share based on a 32% IRR [30]

Group 1 - Asbury Automotive Group, Inc. (NYSE: ABG) has seen a modest performance over the past year, with a gain of approximately 7% [1] - The company's core maintenance business is performing well, but there are ongoing concerns that auto tariffs may negatively impact car sales and profit margins [1]