Asbury Earnings: New and Used Vehicle Headwinds Likely to Remain Throughout 2024

Asbury reported first-quarter 2024 results that, like many auto dealers, reported strong headwinds in both new and used vehicle profitability. We are lowering our fair value estimate to $300 per share from $330 on a higher share count than previously modeled and higher floorplan interest expense throughout our five-year explicit forecast period in light of how both figures look after first-quarter results. The latter change lowers our midcycle operating margin by 20 basis points to 5% and constitutes most of the fair value decline. We still consider Asbury one of the top dealer operators in our coverage, and its growth runway to $30 billion annual revenue by 2030 remains in place given the highly fragmented nature of the sector and Asbury’s access to capital. We like the firm repurchasing its stock for $50 million in the quarter since it’s well below our fair value estimate.