Asbury Automotive Reports 16% Year-over-Year Revenue Growth in Q3 2024

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Asbury Automotive Reports 16% Year-over-Year Revenue Growth in Q3 2024

Asbury Automotive Group, Inc. (NYSE: ABG) demonstrated strong performance in the third quarter of 2024 despite operational challenges. The company reported a 16% year-over-year increase in revenue, reaching $4.2 billion, with an adjusted earnings per share (EPS) of $6.35.

However, the quarter’s profitability was impacted by Hurricane Helene and sales stoppage orders on certain Toyota, Lexus, and BMW models, affecting EPS estimates between $0.39 and $0.43. While there was an improvement in used vehicle profitability, new vehicle gross profit per unit saw a decline. Asbury Automotive also continued its share repurchase program, buying back 400,000 shares for $89 million during the quarter.

Key Points:

  • Asbury Automotive Group generated $4.2 billion in revenue in Q3 2024, reflecting a 16% increase year-over-year.
  • Adjusted EPS was $6.35, affected by Hurricane Helene and sales stoppage orders on certain vehicle models.
  • The company repurchased 400,000 shares for $89 million during the quarter.
  • Used vehicle profitability improved, while gross profit per unit for new vehicles declined.
  • The parts and services segment showed growth despite hurricane disruptions. Clicklane sales increased by 13%, and new unit sales rose by 20% year-over-year.

Company Outlook: A pilot program with Tekion will be launched in four stores in Q4. Management aims to maintain SG&A as a percentage of gross profit in the mid-60s during Q4. Full-year pre-tax income estimates for TCA range between $70 million and $80 million. The company plans to prioritize gross profit over volume in the used vehicle business.

Negative Points:

  • Hurricane Helene and sales stoppage orders significantly affected sales, especially in Florida.
  • Gross profit per unit for new vehicles faced challenges due to issues with Stellantis.
  • The company is exposed to higher sales stoppage rates due to a heavy mix of Lexus and Toyota brands.

Positive Points:

  • Service customer labor gross profit at Western stores grew by 22% year-over-year.
  • Parts and service operations are expected to benefit from upcoming warranty repairs.
  • The company concluded the third quarter with a strong liquidity position of $768 million.

Shortcomings:

  • Estimated EPS was negatively impacted by the hurricane and sales stoppages, ranging from $0.39 to $0.43.
  • Same-store used vehicle sales declined by 6% partly due to hurricanes and sales stoppages.

Q&A Highlights:

  • The company is enhancing its swap and inventory acquisition strategies while awaiting stabilization of inventory levels.
  • The implementation of the Tekion platform is expected to improve efficiencies and reduce SG&A costs in the long run.
  • Challenges are anticipated in the F&I segment in 2025 and 2026, with a recovery expected in 2027.
  • Electric vehicle sales currently account for 6% to 7% of total sales, and are expected to stabilize by 2030.

Asbury Automotive Group, Inc. (NYSE: ABG) is exhibiting cautious optimism as it tackles market disruptions and focuses on strategic initiatives to strengthen its operations. The company’s resilience against challenges and commitment to effective capital allocation while increasing profitability positions it for future growth. The next earnings call is scheduled for early 2025, where further information about the company’s performance and strategies will be shared.

InvestingPro Forecasts: Asbury Automotive Group's (NYSE: ABG) strong third-quarter performance aligns with several key metrics and forecasts obtained from InvestingPro. The company's revenue growth, reaching $4.2 billion with a 16% year-over-year increase, is reflected in InvestingPro data, showing a 12.24% revenue growth over the last twelve months and a stronger quarter-on-quarter revenue growth of 15.56% for Q3 2024.

Despite challenges such as Hurricane Helene and sales stoppage orders, Asbury’s financial health appears solid. The company has a market capitalization of $4.65 billion, underscoring its significant presence in the automotive retail sector. Furthermore, its stock trades at a relatively attractive valuation compared to the broader market, with a price-to-earnings ratio of 8.52 (on a trailing twelve-month adjusted basis).

InvestingPro highlights that Asbury has been profitable over the last twelve months, consistent with the reported adjusted EPS of $6.35 for Q3 2024. Additionally, analysts forecast that the company will remain profitable this year, demonstrating confidence in Asbury's ability to navigate current market challenges.

It is noteworthy that while focusing on share repurchases, the company's lack of dividend payments, as noted by InvestingPro, suggests that it prioritizes shareholder value returns through repurchases over dividends.

InvestingPro presents six additional insights on Asbury Automotive Group, providing investors with a comprehensive analysis of the company's financial condition and market performance.

As the article discusses improvements in used vehicle profitability, one InvestingPro Insight warns that Asbury suffers from weak gross profit margins. This is reflected in a gross profit margin of 17.41% for the last twelve months as of Q3 2024, marking a point of interest for investors to monitor closely.

While Asbury continues to tackle market challenges and emphasize strategic initiatives, these InvestingPro forecasts provide valuable context for understanding the company’s financial situation and potential future performance.