Asbury Automotive ((ABG)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Asbury Automotive Group showcased a strong financial performance and strategic positioning, marked by record-setting results in parts and service, significant acquisition plans, and robust liquidity. However, the company faces uncertainties due to tariffs, a decline in used vehicle sales, and challenges in specific markets, which present notable headwinds.
Record Gross Profit in Parts and Service
The company achieved an all-time record in gross profit for its parts and service business. Same-store gross profit increased by 5%, while customer pay gross rose by 6%, highlighting the strength and growth of this segment.
Significant Long-term Growth in Customer Pay Gross Profit
Since 2014, Asbury Automotive has seen a remarkable 97% increase in customer pay gross profit, demonstrating consistent and substantial growth over a decade.
Pending Acquisition of Herb Chambers Automotive Group
Asbury Automotive Group is preparing to acquire Herb Chambers Automotive Group, marking a strategic entry into the Boston market. This acquisition is expected to close by the end of the second quarter of 2025.
Strong Financial Performance
The company reported $4.1 billion in revenue and a gross profit of $724 million, with adjusted earnings per share of $6.82, underscoring its robust financial health.
Improvement in Same-Store New Vehicle Sales
Same-store new vehicle revenue increased by 6% year-over-year, with units up by 4%, driven by a boost in March sales.
Liquidity and Capital Allocation
Asbury ended the first quarter with $964 million in liquidity and plans to focus on deleveraging over the next 18 to 24 months, reflecting a prudent approach to capital management.
Impact of Tariffs
The introduction of new tariffs has created uncertainties, with 56% of new vehicle units shielded. However, the full impact on pricing and metrics remains unclear.
Decline in Used Vehicle Sales
Used vehicle unit volume decreased by 8% year-over-year, although there was sequential growth in used retail gross profit per unit.
Weather-related Disruptions
Adverse weather conditions negatively impacted parts and service growth, which could have been higher without these disruptions.
Challenges in Specific Markets
The DC and Baltimore markets showed weakness due to uncertainties around government jobs, impacting overall performance.
Forward-looking Guidance
Asbury Automotive Group’s forward-looking guidance highlights a focus on deleveraging following the acquisition of Herb Chambers Automotive Group, valued at $1.34 billion. The company aims to reduce leverage over the next 18 to 24 months, with a transaction-adjusted net leverage of 2.75 times at the end of March.
In summary, Asbury Automotive Group’s earnings call reflected a strong financial performance and strategic growth initiatives, despite facing challenges from tariffs, used vehicle sales decline, and market-specific issues. The company’s focus on acquisitions and capital management positions it well for future growth.