Group 1 Earnings: Good Quarter Despite Hurricane and Stop-Sale Challenges

Group 1’s third quarter showed management is doing well on variables it can control, such as integrating acquisitions, adding service technician headcount, and controlling costs. Variables beyond its control took a lot out of earnings. Still, we are raising our per share fair value estimate to $333 from $312 to account for more scale opportunity now that the 54-store Inchcape acquisition has made the firm’s UK operations notably larger and to capture the firm's ability to generate higher operating margins, including floorplan interest, than we previously believed based on 2024 performance. We have raised our midcycle operating margin figure by 20 basis points to 4.2%.