Group 1 Automotive (GPI) Up 2.2% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Group 1 Automotive (GPI). Shares have added about 2.2% 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 drivers.

Group 1 Automotive Q2 Earnings & Sales Beat Estimates

Group 1 Automotive reported adjusted earnings per share of $3.77 in second-quarter 2020, beating the Zacks Consensus Estimate of 91 cents. The bottom line also rose from the prior-year quarter’s $2.83 per share. Higher-than-expected revenues from new vehicles led to the outperformance.

Revenues of $2.13 billion fell 29.1% year over year. The top line, however, beat the Zacks Consensus Estimate of $2.06 billion.

Q2 Highlights

New-vehicle retail sales declined 32.1% from the prior-year quarter to $1.06 billion. However, the figure surpassed the Zacks Consensus Estimate of $1.04 billion. Used-vehicle sales fell 23.6% from the year-ago quarter to $641.2 million. The metric also missed the consensus mark of $794 million. For the Parts and Service business, the top line slumped 25.4% from a year ago to $282 million. It also missed the Zacks Consensus Estimate of $312 million. Revenues from the Finance and Insurance business were down 24% from the prior-year period to $96.7 million. It also missed the Zacks Consensus Estimate of $98 million.

Segments in Detail

Revenues in the U.S. business segment fell 19.6% year over year to $1.83 billion. The segment’s gross profit also dropped 13.9% year over year to $324.5 million. In the reported quarter, retail new-vehicle, used-vehicle, and wholesale used-vehicle units sold were 21,937, 26,132 and 5,150, respectively.

Revenues declined 57.1% year over year to $263.5 million for the U.K. business segment. Gross profit was $29.4 million, marking a 54.1% decrease from the second quarter of 2019. In the quarter under review, retail new-vehicle, used-vehicle, and wholesale used-vehicle units sold were 3,841, 4,040 and 1,829, respectively.

Revenues for the Brazil business segment slid 67.5% year over year to $36.6 million. Further, the segment’s gross profit declined 63.3% year over year to $4.9 million. In the reported quarter, retail new-vehicle, used-vehicle and wholesale used-vehicle units sold were 694, 356 and 324, respectively.

Financial Details

Group 1 Automotive’s cash and cash equivalents fell to $72.7 million as of Jun 30, 2020, from $23.8 million on Dec 31, 2019. Long-term debt was $1,360.7 million as of Jun 30, 2020, marking a decrease from $1,432.1 million recorded as of Dec 31, 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 15.06% due to these changes.

VGM Scores

Currently, Group 1 Automotive has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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 A. 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. It comes with little surprise Group 1 Automotive has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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