Asbury Automotive Group Q3 2024 Earnings Report

Asbury (NYSE:ABG) Automotive Group, Inc. has reported a robust third-quarter performance for 2024, with a significant revenue increase despite facing operational challenges. The company announced a 16% year-over-year revenue growth, reaching $4.2 billion, and an adjusted earnings per share (EPS) of $6.35.

However, the quarter's profitability was affected by Hurricane Helene and stop sale orders for certain Toyota (NYSE:TM), Lexus, and BMW (ETR:BMWG) models, which impacted EPS by an estimated $0.39 to $0.43. Used vehicle profitability saw improvement, but new vehicle gross profit per unit experienced a decline. Asbury Automotive also continued its share repurchase program, buying back 400,000 shares for $89 million in the quarter.

Key Takeaways

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

Company Outlook

• The fourth quarter will see the launch of a pilot program with Tekion across four stores.
• Management aims to maintain SG&A as a percentage of gross profit in the mid-60s for Q4.
• Full-year pre-tax income estimates for TCA are between $70 million and $80 million.
• The company plans to prioritize gross profit over volume in its used car business.

Bearish Highlights

• Hurricane Helene and stop sale orders significantly affected sales, particularly in Florida.
• New vehicle gross profit per unit faced challenges due to issues with Stellantis (NYSE:STLA).
• The company is exposed to higher stop sale percentages due to its heavy Lexus and Toyota brand mix.

Bullish Highlights

• Service customer pay labor gross profit for Western stores grew by 22% year-over-year.
• Parts and service operations are expected to benefit from upcoming warranty fixes.
• The company ended Q3 with a strong liquidity position of $768 million.

Misses

• The estimated EPS was negatively impacted by $0.39 to $0.43 due to the hurricane and stop sales.
• Same-store used vehicle sales declined by 6%, partly due to the hurricanes and stop sales.

Q&A Highlights

• The company is enhancing trade-ins and inventory acquisition strategies while awaiting inventory level stabilization.
• The Tekion platform rollout is expected to improve productivity and reduce SG&A costs in the long term.
• Challenges in the F&I segment are expected in 2025 and 2026, with a turnaround anticipated in 2027.
• Electric vehicle sales currently represent 6% to 7% of total sales, with expectations to stabilize by 2030.

Asbury Automotive Group, Inc. remains cautiously optimistic as it navigates through the challenges of market disruptions and focuses on strategic initiatives to bolster its operations. The company's resilience in the face of adversity and its commitment to improving profitability while managing capital allocation effectively positions it for future growth. The next earnings discussion is scheduled for early 2025.

InvestingPro Insights

Asbury Automotive Group's Q3 performance highlights include:
– 16% year-over-year revenue growth to $4.2 billion.
– Solid financial health with a market capitalization of $4.65 billion and a P/E ratio of 8.52.
– Share repurchases indicate a focus on returning value to shareholders.
– Caution advised for investors due to weak gross profit margins, which stand at 17.41%.

This article reflects on Asbury Automotive Group's ability to navigate through various challenges while focusing on growth and strategic initiatives.