Company Reports

Group 1's stock fell over 16% in intraday July 30 trading after reporting second-quarter adjusted diluted EPS of $9.61 that missed the $10.81 LSEG consensus. The company also announced that by year-end it is closing on the acquisition of 10-store Hennessy Automotive in Atlanta for $1.3 billion.

Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio has improved to below 70%, including rent expense compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing nontechnican headcount 11% on a same-store basis versus 2019. Work schedule accommodations for service technicians and air-conditioned service shops to improve employee retention for this highly lucrative segment helps fight the cyclicality of selling vehicles. The Val-U-Line strategy comes from wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with online used-vehicle competition, such as Carvana, but is also for new vehicles, service, and buying vehicles from consumers. We think digital and branding US stores under the Group 1 name will enable much better SG&A leverage and increase used-vehicle sales over time.

Group 1's first-quarter adjusted diluted EPS of $8.66 fell 14.8% year-over-year on lengthy store closures from winter weather and missed the $8.86 LSEG consensus. The company announced job cuts and other discretionary spending reductions to combat US vehicle affordability challenges.

Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio has improved to below 70%, including rent expense compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing nontechnican headcount 11% on a same-store basis versus 2019. Work schedule accommodations for service technicians and air-conditioned service shops to improve employee retention for this highly lucrative segment helps fight the cyclicality of selling vehicles. The Val-U-Line strategy comes from wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with online used-vehicle competition, such as Carvana, but is also for new vehicles, service, and buying vehicles from consumers. We think digital and branding US stores under the Group 1 name will enable much better SG&A leverage and increase used-vehicle sales over time.

Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio has improved to below 70%, including rent expense compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing nontechnican headcount 11% on a same-store basis versus 2019. The company in 2018 began transforming itself with its Val-U-Line used-vehicle strategy and scheduling accommodations for service technicians, and more recently, air-conditioned service shops, to improve employee retention and increase technician headcount. Val-U-Line comes from wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with online used-vehicle competition, such as Carvana, but is also for new vehicles, service, and buying vehicles from consumers. We think digital will enable much better SG&A leverage and increase used-vehicle sales over time.

Group 1's stock fell more than 6% in Jan. 29 trading after the firm reported fourth-quarter adjusted diluted earnings per share of $8.49, missing the $9.41 LSEG consensus. UK restructuring efforts continued, and more action will come in 2026.

Group 1's stock fell 6% during Oct. 28 trading after the company reported third-quarter adjusted diluted EPS of $10.45, up 5.6% year over year but below the $10.73 LSEG consensus. The company also announced further headcount reductions coming in the UK.

Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio has improved to under 70%, including rent expense compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing nontechnican headcount 11% on a same-store basis versus 2019. The company in 2018 began transforming itself with its Val-U-Line used-vehicle strategy and scheduling accommodations for service technicians, and more recently, air-conditioned service shops, to improve employee retention and increase technician headcount. Val-U-Line comes from wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with online used-vehicle competition, such as Carvana, but is also for new vehicles, service, and buying vehicles from consumers. We think digital will enable much better SG&A leverage and increase used-vehicle sales over time.

Group 1 reported record quarterly revenue and gross profit. Second-quarter adjusted diluted earnings per share from continuing operations rose 17.5% year over year to $11.52 and beat the $10.61 LSEG consensus, while operating margin fell as levels normalize after the chip shortage.

Group 1's United Kingdom restructuring efforts are yielding good results, with more cost savings to come in the first half of this year. These efforts, along with same-store sales growth in all segments, enabled first-quarter adjusted diluted EPS to rise 7.1% year over year to $10.17.

Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio has improved to under 70%, including rent expense compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing nontechnican headcount 11% on a same-store basis versus 2019. The company in 2018 began transforming itself with its Val-U-Line used-vehicle strategy and scheduling accommodations for service technicians, and more recently, air-conditioned service shops, to improve employee retention and increase technician headcount. Val-U-Line comes from wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with online used-vehicle competition, such as Carvana, but is also for new vehicles, service, and buying vehicles from consumers. We think digital will enable much better SG&A leverage and increase used-vehicle sales over time.

Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio has improved to under 70%, including rent expense compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing nontechnican headcount 11% on a same-store basis versus 2019. The company in 2018 began transforming itself with its Val-U-Line used-vehicle strategy and scheduling accommodations for service technicians, which are improving employee retention and increasing technician headcount. Val-U-Line comes from wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with online used-vehicle competition, such as Carvana, but is also for new vehicles, service, and buying vehicles from consumers. We think digital will enable much better SG&A leverage and increase used-vehicle sales over time.

The White House on March 5 said that the 25% tariffs on vehicles imported into the US from Canada and Mexico that began a day earlier will be delayed for one month, provided those vehicles comply with the United States-Mexico-Canada Agreement. The change came after President Donald Trump spoke with the leaders of the Detroit Three, who argued that the tariffs hurt firms such as theirs but not those that export vehicles into the US from nations such as Japan, Germany, and South Korea. White House comments to the media on March 5 indicate that tariffs on all vehicle imports regardless of the country of origin will still commence on April 2, so we think 25% or reciprocal tariffs will start at that time.

The 25% tariffs on all US imports from Canada and Mexico began March 4. These tariffs are punishment for what President Donald Trump feels are inadequate measures by these two nations and China for fentanyl and illegal immigration into the US. Lately, White House rhetoric seems more focused on fentanyl than immigration. We consider these tariffs very bad news for our US autos coverage, but for now, we're leaving our fair value estimates in place.

Group 1’s fourth-quarter earnings saw good growth in the US and in service, which was tempered by poor overhead cost leverage in the UK as the company integrates the 54-store Inchcape acquisition that closed in the third quarter. We are increasing our per-share fair value estimate to $342 from $333 on the time value of money. We will also reassess all valuation inputs once we roll our model forward a year for the 10-K.

Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio improved to 64.2% including rent expense in 2023 compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing nontechnican headcount 11% on a same-store basis versus 2019. The company in 2018 began transforming itself with its Val-U-Line used-vehicle strategy and scheduling accommodations for service technicians, which are improving employee retention and increasing technician headcount. Val-U-Line comes from wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with new entrants to the online used-vehicle market such as Carvana but is also for new vehicles, service, and buying vehicles from consumers. We think digital will enable much better SG&A leverage and increase used-vehicle sales over time.

We expect trade policy and electric vehicle tax credits to be the US auto industry focus of a second US presidential term for Donald Trump. Emission regulations will also likely come into play, as we don't expect the Trump administration to grant California a waiver to set its own rules under the Clean Air Act of 1970. We also expect Environmental Protection Agency rules for 2027-32 model years issued in March, which, relative to the 2026 rule, call for a nearly 50% reduction in average light vehicle fleet carbon dioxide emissions for 2032 down to 85 grams (73 for cars and 90 for trucks) of C02 per mile, to be reduced or eliminated.

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%.

Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio improved to 64.2% including rent expense in 2023 compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing nontechnican headcount 11% on a same-store basis versus 2019. The company in 2018 began transforming itself with its Val-U-Line used-vehicle strategy and scheduling accommodations for service technicians, which are improving employee retention and increasing technician headcount. Val-U-Line comes from wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with new entrants to the online used-vehicle market such as Carvana but is also for new vehicles, service, and buying vehicles from consumers. We think digital will enable much better SG&A leverage and increase used-vehicle sales over time.

Group 1 reported a good second quarter despite $22.9 million in pretax income damage from the June 19 CDK dealer management system cyberattack. We are raising our fair value estimate to $312 from $299 on the time value of money and more revenue growth than previously modeled considering how 2024 sales are tracking. CDK restored core services to Group 1 just a week later, and Group 1 mitigated the damage via its consolidated back office and Acceleride digital shopping platform, enabling deals to be structured during that week. The cyberattack on Group 1’s DMS provider in the US caused lost business income of about $17 million ($0.97 EPS) plus a $5.9 million ($0.34 EPS) disaster pay special item charge to compensate salespeople and service technicians for lost business as well as to retain them. We expect most lost vehicle sales volume can be made up in the third quarter, but roughly $25 million of lost service revenue will likely not be made up as those vehicles were likely serviced elsewhere. Adjusted diluted EPS from continuing operations of $9.80 beat the $9.36 LSEG consensus but fell 16.4% year over year as profits continue to come down for dealers after the chip shortage-induced high levels of the past few years.