Group 1 Automotive (GPI) Q1 Earnings Miss On Lower Sales

Share price of Group 1 Automotive Inc. (NYSE:GPI) declined 8% to $68.95 on Apr 28, after the company reported a weak first-quarter performance. It recorded a 3.8% year-over-year decrease in adjusted earnings per share to $1.53 in first-quarter 2017. The figure also missed the Zacks Consensus Estimate of $1.71. Adjusted net income decreased 11.5% to $32.8 million from $37.1 million in the year-ago quarter.

On a reported basis, Group 1 Automotive recorded a net income of $33.9 million or $1.58 per share. In the prior-year quarter, the company recorded a net income of $34.3 million or $1.47 per share.

Revenues decreased 3.4% year over year to $2.52 billion and missed the Zacks Consensus Estimate of $2.58 billion. The top line was weakened by lower sales in energy price that impacted markets, including Texas, Houston and Oklahoma.

Revenues from new vehicle retail sales fell 5.2% to $1.34 billion due to a 6.1% decrease in sales to 38,290 units. Revenues from retailed used vehicles dropped 4% to $660.9 million on a 3.7% decline in sales to 31,566 units. Revenues from used vehicle wholesale sales increased 2.5% to $104.2 million. Used vehicles’ wholesale volume rose 1.1% to 14,529 units.

From the Parts and Service business, revenues improved 2.9% to $271.2 million. The company’s Finance and Insurance business witnessed a 4.8% fall in revenues to $85.8 million.

Gross profit decreased 1.4% to $383.5 million from $389.1 million in the year-ago quarter. Operating income declined to $80.1 million from $82 million.

Segment Details

Revenues in the U.S. business fell 5.5% to $2 billion. The segment recorded a 7.5% decrease in new vehicle retail sales to $1 billion and a 5.6% decline in total used vehicles’ retail sales to $592.5 million. Parts and Service revenue increased 2.9%, while Finance and Insurance revenues declined 4.8%.

Revenues in the U.K.business augmented 4.3% to $450.3 million from $431.9 million in the year-ago quarter. Retail new vehicle sales rose 4.9% to $258.6 million and total used vehicle sales grew 2.6% to $145.9 million. Parts and Service revenue increased 6.5%, while Finance and Insurance revenues advanced 4.2%.

Revenues from the Brazil business rose 6.3% to $100.8 million in the reported quarter. New vehicle retail sales declined 4.1% to $60.3 million, while total used vehicle sales surged 33.7% to $26.7 million. Parts and Service revenues were up 11.1%, while Finance and Insurance revenues grew 48.1%.

Financial Details

Group 1 Automotive’s cash and cash equivalents increased to $33.8 million as of Mar 31, 2017 from $21 million as of Dec 31, 2016. Total debt amounted to $1.33 billion as of Mar 31, 2017 compared with $1.25 billion as of Dec 31, 2016.

Share Repurchases

During first-quarter 2017, Group 1 Automotive did not repurchase any shares. As of Apr 28, 2017, the company had $22.4 million remaining under the prior share repurchase authorization.

Acquisitions & Dispositions

During first-quarter 2017, Group 1 Automotive acquired a BMW franchise, which is expected to generate $5 million in annual revenues. The company also opened an add point in the U.K., expanding the Ford network to seven dealerships. The company also disposed off two dealerships in Brazil that generated approximately $25 million in trailing 12-month revenues.

In April 2017, the company also opened an add point in Austin, TX, increasing the U.S. Nissan network to nine dealerships. These add points are expected to generate approximately $60 million in annual revenues.

Price Performance

Group 1 Automotive underperformed the Zacks categorized Automotive - Retail and Whole Sales industry in the last three months. The company’s shares lost 15.1% over this period, compared with a 9% decline recorded by the industry.

Zacks Rank & Key Picks

Currently, Group 1 Automotive carries a Zacks Rank #4 (Sell).

Some better-ranked automobile stocks include Gentex Corporation (NASDAQ:GNTX) , Tata Motors Ltd (NYSE:TTM) and Tower International, Inc. (NYSE:TOWR) .

Gentex carries a Zacks Rank #2 (Buy) and has long-term growth rate of 10.5%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Tata Motors has expected long-term earnings per share growth rate of 27.9%. It carries a Zacks Rank #2 as well.

Tower International holds a Zacks Rank #2. The company has expected earnings growth rate of 10% over the long term.

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