Group 1 Earnings: Impressive Used Vehicle Performance Continues and Inchcape Brings UK Growth

We are not changing our Group 1 fair value estimate after the firm reported a good quarter to start 2024. Adjusted diluted EPS from continuing operations of $9.49 fell 13.2% year-over-year but beat the LSEG consensus of $9.38. Total revenue rose 8.2% to a first-quarter record of $4.5 billion while same-store revenue rose 4.6%, with all segments up except for used wholesale. New-vehicle profitability continues to come down for the dealer sector after artificially high levels induced by the chip shortage. Same store new vehicle units grew 6.4% but new vehicle gross margin contracted by 230 basis points to 7.3% on a 24.2% decline in new-vehicle gross profit per unit. We expect this trend to last all year for the dealers. We continue to be impressed with management's technology change in used vehicles and better inventory location management generating 6.9% used unit growth, but also 3.9% growth in aggregate used gross profit despite a 2.9% fall in used-vehicle GPU to $1,657.