Group 1 Automotive (GPI) Q1 2025 Earnings Call April 24, 2025 10:00 AM ET Company Participants Pete DeLongchamps - Senior Vice President, Manufacturer Relations, Financial Services & Public AffairsDaryl Kenningham - CEO, President & DirectorDaniel McHenry - Senior VP & CFORajat Gupta - Executive Director, AutosDaniela Haigian - Vice President - Equity ResearchDavid Whiston - Equity Strategist - U.S. AutosBret Jordan - Managing DirectorThomas Wendler - AssociateRon Jewsikow - Director Conference Call Partici ...

Company Performance - Group 1 Automotive (GPI) reported quarterly earnings of $10.17 per share, exceeding the Zacks Consensus Estimate of $9.68 per share, and up from $9.49 per share a year ago, representing an earnings surprise of 5.06% [1] - The company achieved revenues of $5.51 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 3.14%, and an increase from $4.47 billion year-over-year [2] - Over the last four quarters, Group 1 Automotive has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times [2] Stock Outlook - The immediate price movement of Group 1 Automotive's stock will largely depend on management's commentary during the earnings call [3] - The stock has declined approximately 5.4% since the beginning of the year, compared to the S&P 500's decline of 8.6% [3] - The current consensus EPS estimate for the upcoming quarter is $10.16 on revenues of $5.48 billion, and for the current fiscal year, it is $40.98 on revenues of $21.91 billion [7] Industry Context - The Automotive - Retail and Whole Sales industry is currently ranked in the top 19% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5] - Another company in the same industry, AutoNation, is expected to report quarterly earnings of $4.35 per share, reflecting a year-over-year change of -3.1%, with revenues projected at $6.58 billion, up 1.4% from the previous year [9][10]

Revenue Performance - Current quarter total revenues reached $5.5 billion, a 23.1% increase compared to $4.5 billion in the first quarter of 2024[6] - Total revenues for the three months ended March 31, 2025, increased to $5,505.3 million, a 23.1% increase from $4,470.5 million in 2024[26] - Total revenues increased by 23.1% to $5,505.3 million in Q1 2025 from $4,470.5 million in Q1 2024[31] - Total revenues increased by 92.0% to $1,583.5 million compared to $824.8 million in the previous year[35] - Total revenues for the three months ended March 31, 2025, increased to $4,622.7 million, up 5.8% from $4,371.2 million in 2024[37] - Total revenues for the three months ended March 31, 2025, were $861.8 million, an increase of $39.9 million or 4.9% compared to $821.9 million in the same period of 2024[41] Vehicle Sales - The company sold 56,099 new vehicle units, a 26.6% increase year-over-year[7] - New vehicle retail sales rose to $2,680.0 million, reflecting a 22.8% increase compared to $2,182.6 million in the previous year[26] - Used vehicle retail sales increased by 23.9% to $1,755.4 million from $1,416.8 million[26] - Retail new vehicles sold increased by 26.6% to 56,099 units, and retail used vehicles sold rose by 21.2% to 59,618 units[31] - New vehicle retail sales rose by 85.8% to $711.2 million, while used vehicle retail sales increased by 92.6% to $611.1 million[35] - Retail new vehicles sold reached 18,264 units, a 103.8% increase, while retail used vehicles sold were 21,005 units, up 85.9%[35] - New vehicle retail sales reached $2,278.3 million, reflecting a 6.9% increase compared to $2,130.8 million in the previous year[37] - Used vehicle retail sales grew to $1,436.5 million, marking a 3.3% increase from $1,391.0 million[37] - Retail new vehicles sold increased by 5.2% to 45,398 units compared to 43,153 units in the same period last year[37] - The company reported a total used vehicle sales volume of 27,142 units, a 93.3% increase year-over-year[35] Profitability Metrics - Current quarter diluted earnings per share from continuing operations were $9.64, a 10.4% decrease from $10.76 in the prior year quarter[6] - Adjusted diluted earnings per share from continuing operations was $10.17, a 7.1% increase compared to $9.49 for the prior year quarter[6] - Gross profit for the period was $891.9 million, up 20.1% from $742.6 million in the same quarter last year[26] - Total gross profit grew by 20.1% to $891.9 million, with a gross margin of 16.2%[31] - Total gross profit grew by 109.6% to $217.0 million, with a gross margin improvement to 13.7% from 12.5%[35] - Gross profit for the total revenues was $111.0 million, an increase of $8.9 million or 8.7% from $102.1 million in the previous year[41] - The gross margin improved to 12.9%, up from 12.4% in the same quarter last year, representing a 0.5% increase[41] Expenses and Costs - SG&A expenses increased by 29.6% to $617.3 million, resulting in SG&A as a percentage of gross profit rising to 69.2%[31] - SG&A expenses rose by 109.0% to $169.8 million, reflecting increased operational costs[35] - SG&A expenses rose to $520.9 million, an increase of 5.7% from $492.7 million[37] - SG&A expenses were $85.7 million, an increase of $5.8 million or 7.2% compared to $79.9 million in the prior year[43] - Adjusted SG&A expenses rose by 24.0% to $620.3 million, reflecting ongoing investment in operational efficiency[31] - Same Store SG&A expenses were $485.9 million, with a same-store SG&A as a percentage of gross profit at 67.9%[45] Net Income and Earnings Per Share - Net income decreased to $128.1 million, down 13.4% from $147.9 million in the prior year[26] - The company reported a net income of $147.9 million for the three months ended March 31, 2025, down from $165.3 million in the previous year[49] - Diluted earnings per common share from continuing operations was $9.64, a decrease of $0.46 from the same period last year[43] - Diluted earnings per common share for the three months ended March 31, 2025, was $10.80, a decrease of 1.27 from the previous year[49] - Net income from continuing operations available to diluted common shares was $126.2 million, reflecting a decrease of $6.0 million compared to the previous year[43] - Net income from continuing operations available to diluted common shares was $144.1 million, a decrease of 22.5% year-over-year[45] Cash and Debt Management - Cash and cash equivalents increased significantly by 104.9% to $70.5 million from $34.4 million[29] - Total debt decreased by 3.8% to $2,803.4 million from $2,913.1 million[29] - As of March 31, 2025, the company had $353.3 million remaining on its Board authorized common share repurchase program[12] - The company repurchased 286,731 shares at an average price of $428.33, totaling $122.8 million during the current quarter[11] Restructuring and Acquisitions - The company recognized $11.1 million in restructuring charges during the current quarter related to the integration of recently acquired U.K. dealerships[8] - The acquisition of one Lexus and three Toyota dealerships in the U.K. is expected to generate approximately $100.0 million in annual revenues[9] - The company disposed of one Subaru dealership in the U.S. and closed two Volkswagen dealerships in the U.K., which generated approximately $150.0 million in annual revenues[10] Tax and Operating Margins - The effective tax rate for the period was 23.7%, slightly up from 23.3% in the previous year[45] - The operating margin for the period was 5.4%, compared to 4.9% in the previous year, indicating an improvement[45] - The operating margin percentage decreased to 4.6% from 4.8%[37]

Core Viewpoint - Group 1 Automotive reported strong financial results for Q1 2025, with total revenues increasing by 23.1% year-over-year, driven by robust performance in both the U.S. and U.K. markets [5][12]. Financial Performance - Total revenues for Q1 2025 reached $5.5 billion, a 23.1% increase from $4.5 billion in Q1 2024 [12]. - Net income from continuing operations was $127.7 million, down 13.3% from $147.4 million in the prior year [12]. - Adjusted net income from continuing operations increased by 3.6% to $134.7 million compared to $130.0 million in Q1 2024 [12]. - Diluted earnings per share from continuing operations were $9.64, a decrease of 10.4% from $10.76 in the prior year [12][24]. U.S. Operations - U.S. revenues for Q1 2025 totaled $3.9 billion, reflecting a 7.6% increase from $3.6 billion in Q1 2024 [29]. - New vehicle retail sales in the U.S. increased by 9.4% to $1.97 billion, while used vehicle retail sales rose by 4.1% to $1.14 billion [29]. - Gross profit from U.S. operations was $675.0 million, a 5.6% increase from $639.1 million in the previous year [29]. U.K. Operations - U.K. revenues reached $1.6 billion, marking a 92.0% increase year-over-year, with gross profit also hitting a record of $217.0 million [11][12]. - The integration of newly acquired dealerships has improved U.K. SG&A as a percentage of gross profit to pre-acquisition levels [3][6]. - The company recognized $11.1 million in restructuring charges in the U.K. during the current quarter [6]. Vehicle Sales and Margins - Total new vehicle units sold increased by 26.6% to 56,099 units, while used vehicle retail units sold rose by 21.2% to 59,618 units [5][12]. - Gross profit per retail unit for new vehicles decreased by 6.1% to $3,381, and for used vehicles, it decreased by 6.0% to $1,569 [5][12]. Share Repurchases - The company repurchased 286,731 shares at an average price of $428.33, totaling $122.8 million, representing 2.2% of outstanding shares [9][10]. Corporate Development - The company acquired one Lexus and three Toyota dealerships in the U.K., expected to generate approximately $100 million in annual revenues [7]. - The company disposed of one Subaru dealership in the U.S. and closed two Volkswagen dealerships in the U.K., which generated about $150 million in annual revenues [8].

Core Viewpoint - Analysts project Group 1 Automotive (GPI) will report quarterly earnings of $9.54 per share, a 0.5% increase year over year, with revenues expected to reach $5.32 billion, reflecting a 19% increase from the same quarter last year [1]. Earnings Estimates - The consensus EPS estimate for the quarter has been revised upward by 0.8% over the past 30 days, indicating a collective reassessment by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock performance [3]. Revenue Projections - Analysts expect 'Revenues- New vehicle retail sales' to be $2.58 billion, an increase of 18.2% year over year [5]. - 'Revenues- Finance, insurance and other, net' is projected to reach $209.32 million, indicating a 10.8% year-over-year change [5]. - 'Revenues- Total Used vehicle' is estimated at $1.76 billion, reflecting a 15.8% increase from the prior year [5]. - 'Revenues- Used vehicle wholesale sales' are projected to be $118.63 million, showing an 11.9% year-over-year change [6]. - 'Revenues- United States - New vehicle retail sales' is expected to be $1.99 billion, a 10.5% increase from the previous year [6]. - 'Revenues- United States - Used vehicle retail sales' is estimated at $1.17 billion, reflecting a 6.3% year-over-year change [7]. - 'Revenues- United Kingdom - New vehicle retail sales' is projected to reach $592.75 million, indicating a significant 54.9% increase year over year [7]. - 'Revenues- United Kingdom - F&I, net' is expected to be $26.94 million, a 53.9% increase from the year-ago quarter [8]. Units Sold Estimates - 'Units sold - Retail new vehicles sold' is projected to reach 53,958, compared to 44,302 in the same quarter last year [8]. - 'Units sold - Retail used vehicles sold' is expected to be 58,076, up from 49,183 in the same quarter of the previous year [9]. - The consensus estimate for 'Average sales price per unit sold - United States - Used Vehicle Retail' stands at $29,780.44, compared to $28,855 a year ago [9]. - 'Units sold - United Kingdom - Retail new vehicles sold' is projected to be 15,332, compared to 8,961 in the same quarter last year [10]. Market Performance - Group 1 Automotive shares have decreased by 2.2% in the past month, while the Zacks S&P 500 composite has declined by 5.6% [10].

HOUSTON, April 8, 2025 /PRNewswire/ -- Group 1 Automotive, Inc. (NYSE: GPI) ("Group 1" or the "Company"), a Fortune 250 automotive retailer with 260 dealerships located in the U.S. and U.K., today announced that it will release financial results for the first quarter ended March 31, 2025 on Thursday, April 24, 2025 before the market opens.  Daryl Kenningham, Group 1's President and Chief Executive Officer, and the Company's senior management team will host a conference call to discuss the results later that ...

Core Insights - The article emphasizes the importance of value investing and highlights Group 1 Automotive (GPI) as a strong value stock opportunity based on its financial metrics [2][3][7] Valuation Metrics - GPI has a Price-to-Book (P/B) ratio of 1.76, which is favorable compared to the industry average of 2.00. The P/B ratio has fluctuated between 1.28 and 2.17 over the past 52 weeks, with a median of 1.65 [4] - The Price-to-Sales (P/S) ratio for GPI is 0.26, slightly below the industry average of 0.27, indicating a solid valuation based on revenue [5] - GPI's Price-to-Cash Flow (P/CF) ratio stands at 8.35, which is attractive compared to the industry average of 9.69. The P/CF ratio has ranged from 5.13 to 10.31 in the past year, with a median of 7.44 [6] Investment Outlook - The combination of GPI's strong valuation metrics and positive earnings outlook suggests that the stock is currently undervalued, making it an appealing option for value investors [7]

Company Overview - Group 1 Automotive, Inc. is a leading automotive retailer with operations primarily in the United States and the U.K., operating 150 dealerships in the U.S. and 55 in the U.K. [11] - The company sells new and used cars and light trucks, and also offers vehicle financing, insurance, service contracts, maintenance, repair services, and aftermarket automotive products [11]. Investment Metrics - Group 1 Automotive has a Zacks Rank of 3 (Hold) and a VGM Score of B, indicating a solid position in the market [12]. - The company has a Value Style Score of B, supported by attractive valuation metrics, including a forward P/E ratio of 9.36, which is appealing to value investors [12]. - Over the last 60 days, five analysts have revised their earnings estimates upwards for fiscal 2025, with the Zacks Consensus Estimate increasing by $0.80 to $41.18 per share [12]. - Group 1 Automotive has an average earnings surprise of 3%, suggesting a positive trend in earnings performance [12]. Investment Recommendation - With a solid Zacks Rank and top-tier Value and VGM Style Scores, Group 1 Automotive is recommended for investors' consideration [13].

Core Viewpoint - Group 1 Automotive (GPI) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - Rising earnings estimates for Group 1 Automotive suggest an improvement in the company's underlying business, likely leading to an increase in stock price [5][10]. Earnings Estimate Revisions - Group 1 Automotive is projected to earn $41.18 per share for the fiscal year ending December 2025, reflecting a year-over-year increase of 5% [8]. - Over the past three months, the Zacks Consensus Estimate for Group 1 Automotive has risen by 2.6% [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade to Zacks Rank 2 places Group 1 Automotive in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10].

Regulatory Environment - The U.K. plans to ban sales of new gasoline and diesel-powered vehicles after 2035, which could impact vehicle offerings and increase operational costs [67]. - The U.S. EPA finalized new emissions standards for light and medium-duty vehicles for model years 2027 through 2032, aimed at reducing GHG emissions [69]. - The company is subject to risks associated with environmental regulations, including potential increases in operational costs due to stricter GHG emissions limits [68]. - The company may incur significant costs related to compliance with new climate-related disclosure laws, starting in 2026, which could impact access to capital [124]. - The company is assessing the impact of California's Climate Corporate Data Accountability Act, which requires annual disclosure of GHG emissions for companies with revenues over $1 billion [124]. - The company is subject to operational risks associated with environmental laws, which may impose significant costs and liabilities [130]. Market Conditions - The U.K. market fell short of mandated targets for new zero emissions vehicles in 2024, with higher targets set for 2025, potentially challenging new vehicle sales [90]. - Inflation and increased energy costs could adversely impact operations and customer demand for vehicles and services [86]. - A significant portion of vehicle purchases are financed, and tightening credit markets may decrease the availability of automotive loans, adversely affecting sales [87]. - Tariffs and market developments could increase production costs for OEMs, potentially leading to higher vehicle prices and reduced demand [97]. - Changes in fuel prices and consumer preferences could adversely affect vehicle sales volumes and service revenues [121]. Competition and Sales - The company faces significant competition in automotive sales, which could adversely impact sales volumes and margins [100]. - The company is dependent on relationships with manufacturers, which may limit its ability to acquire new dealerships or maintain existing agreements [98]. - The transition to an agency model by Mercedes Benz in the U.K. resulted in reduced revenues, with the company receiving only a commission for each sale [106]. - Increased competition for dealership acquisitions may result in fewer opportunities and higher acquisition prices [103]. - Vehicle technology advancements and changes in consumer preferences may adversely affect new and used vehicle sales volumes [107]. Financial Performance - The company recognized impairment charges for intangible franchise rights amounting to $28.2 million, $25.1 million, and $1.3 million for the years ended December 31, 2024, 2023, and 2022 respectively [134]. - The company’s debt securities are rated just below investment-grade, and any downgrade could negatively impact access to debt markets and increase borrowing costs [91]. - The company faces potential increases in insurance costs and changes in coverage availability, which could materially impact financial conditions [116]. - The company has not recorded any goodwill impairments in the past three years, but market conditions could lead to future impairment charges [134]. Operational Risks - The company relies on vehicle manufacturers for new vehicle inventory, and any disruptions in their production could materially affect business operations [93]. - The company relies on third-party vendors for key operational processes, and disruptions in their services could adversely impact business [108]. - Cybersecurity incidents, such as the one experienced by CDK Global, could negatively affect the company's operations and financial condition [111]. - The company is self-insured for a portion of its potential liabilities, which may expose it to significant financial risks [116]. - The company may face challenges in integrating acquired dealerships, which could impact revenue growth and operational efficiency [105]. Workforce and Internal Controls - As of December 31, 2024, the company had 20,413 employees, with 13,398 in the U.S. and 7,015 in the U.K. [74]. - Management has designed and implemented internal controls and procedures, which are periodically reviewed and updated [137]. - There has not been a material failure of internal controls reported [137]. - Any failure or circumvention of controls could have a material adverse effect on business operations and financial condition [137]. Expansion and Growth - The company doubled its footprint in the U.K. during the current year through the acquisition of Inchcape Retail [104].