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Group 1 Automotive Inc GPI

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Group 1 Posts Quarterly Record EPS in Third-Quarter Results

Analyst Note

| David Whiston, CFA, CPA, CFE |

Group 1’s third quarter continued to show improvement from rising demand and cost cuts following the pandemic, so we see no reason to change our fair value estimate. Adjusted diluted EPS of $6.97 was a company record and beat the Refinitiv consensus of $6.07. Adjusted diluted EPS in third-quarter 2019 was $3.02. A gradual return of some personnel from furlough, others not returning because of digital investments, and demand improvement from the second quarter’s pandemic-induced low enabled selling, general, and administrative costs as a percentage of gross profit to fall below 60% for the first time ever to 59.7%. This 10.3-percentage-point decline year over year in adjusted SG&A to gross profit may never be repeated, but we feel all six dealers we cover have used the pandemic to accelerate cost reductions into 2020 that may have occurred over several years if no pandemic.

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Company Profile

Business Description

Group 1 owns and operates over 185 automotive dealerships, 242 franchises, and 49 collision service centers in the U.S., U.K., and Brazil offering 31 brands of automobiles altogether. U.S. locations are mostly in metropolitan areas in 15 states in the Northeast, Southeast, Midwest, and in California. Revenue in 2019 totaled $12 billion. The company was founded in 1995 and is based in Houston.

Contact
800 Gessner, Suite 500
Houston, TX, 77024
T +1 713 647-5700
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 15,296

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