2024-05-15 00:01:34 ET
Summary
- Asbury Automotive Group's stock performance has been disappointing, up only 10% and flat since my recommendation.
- ABG's Q1 earnings showed a 17% increase in revenue, aided by M&A, and strong earnings are likely this year.
- While new car sales have contracted and margins have declined, the maintenance and financing units continue to generate steady cash flow and contribute disproportionately to gross profit.
- With M&A integration largely complete and $21 in run-rate earnings, I view shares as attractive, with moderate buybacks likely to continue.
Asbury Automotive Group ( ABG ) has been a mixed performer over the past year, up just 10% and below last summer's highs. In September , I rated shares of ABG a "strong buy," but their performance since then has been disappointing. The stock is essentially flat, while the S&P 500 has risen by 16%. Given this underperformance, it is time to revisit to see if the underperformance is merited or if the opportunity for 15+% returns remains. I remain bullish....
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Asbury Automotive: Strength In Maintenance Can Lift Shares