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Asbury Automotive Group Inc ABG

Morningstar Rating
$231.30 +3.22 (1.41%)
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Company Report

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.

Price vs Fair Value

ABG is trading at a 871% premium.
Price
$231.30
Fair Value
$785.00
Uncertainty
High
1-Star Price
$718.00
5-Star Price
$934.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

The firm's product mix, weighted toward import and luxury brands, brings more affluent consumers to the dealership, which partially mitigates the sales decline during cyclical downturns that auto sales typically experience. Most Clicklane digital customers are also of a higher credit quality and wealth than the company had in the past.

Bears

Customers could delay maintenance or choose a cheaper independent repair shop instead of going to the dealer for servicing an older vehicle, which would negate the technological advantage that Asbury enjoys over smaller repair shops.

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News

Trading Information

Previous Close Price
$228.08
Day Range
$229.60231.61
52-Week Range
$178.40256.39
Bid/Ask
$230.44 / $232.23
Market Cap
$4.67 Bil
Volume/Avg
69,126 / 170,686

Key Statistics

Price/Earnings (Normalized)
7.37
Price/Sales
0.31
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
6.47%

Company Profile

Asbury Automotive Group is a regional collection of automobile dealerships that went public in March 2002. The company operates 157 new-vehicle stores and 37 collision centers. Over 70% of new-vehicle revenue is from luxury and import brands. Asbury also offers third-party financing and insurance products and its own F&I products via Total Care Auto. Asbury operates in 15 states (mostly Texas, the West, the Mid-Atlantic, and the Southeast). Asbury store brands include McDavid and Park Place in Texas, Koons in the Washington, D.C. area, and the Larry H. Miller brand in the Western US. Asbury generated $14.8 billion of revenue in 2023 and is based in the Atlanta area. The firm targets at least $30 billion of revenue sometime between 2025 and 2030.
Sector
Consumer Cyclical
Industry
Auto & Truck Dealerships
Stock Style Box
Small Value
Total Number of Employees
15,000

Competitors

Valuation

Metric
ABG
BRK.B
AN
Price/Earnings (Normalized)
7.3722.177.84
Price/Book Value
1.391.562.95
Price/Sales
0.312.190.27
Price/Cash Flow
5.4724.205.96
Price/Earnings
ABG
BRK.B
AN

Financial Strength

Metric
ABG
BRK.B
AN
Quick Ratio
0.210.20
Current Ratio
1.060.77
Interest Coverage
5.8418.865.14
Quick Ratio
ABG
BRK.B
AN

Profitability

Metric
ABG
BRK.B
AN
Return on Assets (Normalized)
7.41%3.90%8.24%
Return on Equity (Normalized)
20.85%7.49%43.15%
Return on Invested Capital (Normalized)
10.91%6.61%12.50%
Return on Assets
ABG
BRK.B
AN
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