Group 1 Automotive (GPI) posted a 54.6% year-on-year increase in adjusted earnings per share to $1.67 in the fourth quarter of 2014 that surpassed the Zacks Consensus Estimate by 36 cents. Net income grew 40.7% to $40.7 million from $28.9 million in the year-ago quarter.
Revenues increased 11.4% year over year to $2.54 billion, beating the Zacks Consensus Estimate of $2.48 billion. The year-over-year improvement was driven by strong performances across all of the company’s businesses. All the geographic markets delivered significant improvement, with strong growth witnessed in the U.S. and U.K. along with cost reductions in Brazil. This boosted results in all three countries.
Revenues from new vehicle sales escalated 9.9% to $1.5 billion on an 8.4% increase in unit sales to 42,197 vehicles. Revenues from retailed used vehicles improved 15.6% to $581.8 million on a 15.1% increase in unit sales to 27,499 vehicles. Revenues from wholesale used vehicles went up 6.9% to $94.7 million. Used vehicles’ wholesale volume increased 7.4% to 13,838 units.
Revenues from the Parts and Service business increased 9.5% to $281.4 million. The company’s Finance and Insurance business witnessed a 21.3% rise in revenues to $95.7 million.
Gross profit increased 13.9% to $366 million from $321.3 million in the year-ago quarter. However, operating income decreased 7.7% to $56.4 million from $61.1 million in the fourth quarter of 2013.
2014 Performance
Earnings for full-year 2014 increased 18.3% to $5.87 per share from $4.96 in 2013 and also surpassed the Zacks Consensus Estimate of $5.56. The enhanced profitability was based on improvement in capital structure and reduction in costs.
Revenues for 2014 increased 11.4% to $9.94 billion, marginally surpassing the Zacks Consensus Estimate of $9.89 billion.
Segment Details
Revenues in the U.S. business increased 13.1% to $2.1 billion on the back of better performance in all operations and increase in sales volume. The segment recorded a 10.3% increase in new vehicle sales to 34,020 units and a 16.6% increase in total used vehicles volume to 34,402 units.
Revenues in the U.K. business augmented 19.6% to $236 million from $197.4 million in the year-ago quarter due to significant growth across all businesses. Retail new vehicle sales increased 19.7% to 3,545 units and total used vehicle sales escalated 13.7% to 4,901 units.
Revenues from the Brazil business decreased 10.4% to $198.5 million in the quarter. New vehicle retail sales decreased 9.7% to 4,632 units, while total used vehicle sales dropped 10.5% to 2,034 units.
Financial Details
Group 1 Automotive’s cash and cash equivalents surged to $40.9 million as of Dec 31, 2014, from $20.2 million as of Dec 31, 2013. Total debt amounted to $365.1 million as of Dec 31, 2014, compared with $287.2 million as of Dec 31, 2013.
Capital Restructuring
In Sep 2014, Group 1 Automotive redeemed all of its 2.25% Convertible Senior Notes, due in 2036. Further, the company purchased the remaining $22.55 million of its outstanding 3.00% Convertible Senior Notes, due in 2020. The company also issued $550 million 5.00% Senior Notes, due in 2022 to fund the redemption. The capital restructuring reduced the share count by around 2.7 million shares.
Share Repurchase
In 2014, Group 1 Automotive repurchased 537,000 shares at an average price of $68.51. As of Dec 31, 2014, it had around $99.4 million shares remaining under the share repurchase authorization.
Acquisitions & Dispositions
During the fourth quarter, Group 1 Automotive acquired 3 BMW/MINI dealerships in the U.K. The company was also granted a Sprinter franchise in Beaumont, TX. Group 1 Automotive expects that these franchises will generate around $230 million in annual revenues.
During the reported quarter, Group 1 Automotive disposed four franchises – one Fiat franchise in Houston, TX and three Renault franchises in Brazil. These dealerships generated $60 million in trailing twelve-month revenues.
In 2014, Group 1 Automotive acquired 19 franchises worldwide that are expected to generate around $910 million in annual revenues. The company also disposed off 12 franchises that generated trailing twelve-month revenues of $450 million.
Currently, Group 1 Automotive carries a Zacks Rank #3 (Hold). Other well-ranked automobile stocks include Asbury Automotive Group, Inc. (ABG), AutoNation Inc. (AN) and Lithia Motors Inc. (LAD). While Asbury Automotive sports a Zacks Rank #1 (Strong Buy), both AutoNation and Lithia Motors carry a Zacks Rank #2 (Buy).
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