On Thursday, Stephens maintained its Equal Weight rating on Group 1 Automotive Inc . (NYSE: NYSE:GPI) but increased the price target to $402 from the previous $394. This adjustment follows the company's third-quarter earnings report released before market open on Wednesday.
Group 1 Automotive disclosed GAAP and adjusted earnings per share (EPS) of $8.69 and $9.90, respectively. These figures compare with Stephens' and the Street's adjusted EPS expectations of $9.65 and $9.91. The company's adjusted EBITDA for the quarter was $246 million, a decrease of 9.3% year-over-year, but still came above Stephens' and the Street's projections of $235 million and $242 million.
The third quarter of 2024 marked the first financial reporting period for Group 1 Automotive since the completion of its Inchcape (OTC:INCPY) acquisition. This strategic move has notably doubled the company's exposure in the United Kingdom. At the end of the quarter, Group 1 Automotive reported having 2,000 new and used vehicles on stop sales.
Stephens' financial model forecasts a 3.2% year-over-year decline in EBITDA for the fourth quarter of 2024, followed by a projected growth of 4.5% in 2025. The revised price target of $402 is based on 8.0 times the firm's next twelve months (NTM) EBITDA estimate. This price target update reflects the latest earnings data and the implications of the recent acquisition on the company's financial outlook.
In other recent news, Group 1 Automotive reported a strong third quarter with record total revenues of $5.2 billion. The company's adjusted net income reached $133.5 million, driven largely by new and used vehicle sales, which contributed $2.6 billion and $1.7 billion, respectively.
The successful integration of 54 UK dealerships acquired from Inchcape added an impressive $2.7 billion to the revenue, despite challenges such as the CDK outage and Hurricane Beryl.
These developments have been recent highlights for Group 1 Automotive. The company's leadership team, under CEO Mark Raban, is working towards full integration of Inchcape by the end of 2024. Additionally, Group 1 Automotive's liquidity stands at $813 million, with a rent-adjusted leverage ratio at 2.98 times.
In terms of future expectations, analysts note the company's focus on balancing acquisitions with shareholder returns. While the US market is seen as ripe for further acquisitions, the UK market is perceived as saturated. Despite some challenges in the used vehicle market and pressure on new vehicle margins, the company's strategic acquisitions and operational efficiency underscore a commitment to long-term growth.
InvestingPro Insights
Group 1 Automotive's recent performance and strategic moves are reflected in the latest InvestingPro data and tips. The company's P/E ratio of 8.6 (adjusted for the last twelve months) suggests a potentially undervalued stock, aligning with Stephens' increased price target. This valuation metric is particularly interesting given the InvestingPro Tip that GPI is "Trading near 52-week high" and has shown a "High return over the last year" with a 50.7% price total return over the past year.
The company's revenue growth of 8.46% over the last twelve months and 3.03% in the most recent quarter (Q2 2024) indicates continued expansion, which could be partly attributed to the Inchcape acquisition mentioned in the article. However, an InvestingPro Tip notes that GPI "Operates with a significant debt burden," which investors should consider in light of the recent acquisition and expansion.
For those interested in dividend performance, GPI "Has raised its dividend for 3 consecutive years" and "Has maintained dividend payments for 15 consecutive years," according to InvestingPro Tips. This consistent dividend history may appeal to income-focused investors, although the current dividend yield stands at a modest 0.5%.
InvestingPro offers 12 additional tips for GPI, providing a more comprehensive analysis for investors looking to delve deeper into the company's prospects.
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