Key Predictions for Asbury (ABG) This Earnings Season
While solid demand across all segments is likely to have fueled Asbury's (ABG) Q3 performance, rising operating costs might have dented the company's margins.
Asbury Automotive Group, Inc. ABG is set to release third-quarter 2021 results on Oct 26, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share and revenues is pegged at $6.48 and $2.31 billion, respectively.
This automotive retailer posted better-than-expected earnings in the last reported quarter on higher-than-anticipated revenues across all segments.
Asbury surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 21.31%. This is depicted in the graph below:
Asbury Automotive Group, Inc. Price and EPS Surprise
Trend in Estimate Revisions
The Zacks Consensus Estimate for Asbury’s third-quarter earnings per share has been revised upward by 8 cents to $6.48 in the past seven days. Moreover, this compares favorably with the year-ago quarter’s $4.08 per share. Also, the Zacks Consensus Estimate for revenues suggests a year-over-year rise of 25.27%.
Our proven model does not conclusively predict an earnings beat for Asbury for the to-be-reported quarter, as it does not have the right combination of the two key ingredients. A combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. However, this is not the case as elaborated below.
Earnings ESP: Asbury has an Earnings ESP of -1.62%. This is because the Most Accurate Estimate is pegged 11 cents below the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Asbury carries a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors at Play
With the sustained recovery of the economy from the pandemic blues, auto sales across the globe have managed to rebound, underlined by the rising momentum of new vehicle sales. Consequently, the demand for automotive products and services is likely to have picked up in the third quarter. Thus, Asbury’s quarterly results are likely to reflect the positive impact of rising demand across all of the company’s segments.
The Zacks Consensus Estimate for Asbury’s New Vehicle segment revenues is pegged at $1,197 million, for the period in discussion, suggesting a jump from the $958 million reported in the prior-year quarter. In addition, the consensus mark for the segment’s gross profit is pinned at $105 million, calling for a rise from the $61 million seen in the third quarter of 2020.
The consensus mark for quarterly sales from the Used Vehicle segment is pinned at $731 million, calling for a jump from the $570 million registered in the corresponding quarter of 2020. The same for the segmental gross profit is $66 million, indicating a surge from the prior-year quarter’s $49.2 million.
The consensus mark for quarterly sales from the Parts and Service segment is pegged at $296 million, suggesting a rise from the $237 million registered in the year-earlier quarter. The same for the segmental gross profit is $187 million, indicating a surge from the prior-year quarter’s $145 million.
The Zacks Consensus Estimate for revenues from the Finance and Insurance segment is pegged at $93 million, for the period in discussion, calling for a jump from the $81 million reported in the prior-year quarter.
During the quarter under discussion, Asbury partnered with Salty to further expand the capabilities of its online car buying platform — Clicklane — thereby, enhancing customer experience. The company also improved the Clicklane experience via a strategic partnership with Insignia Group to provide customers with additional vehicle customization accessories like wheels, cargo storage solutions, and other OEM catalogs before finalizing the purchase of their vehicles. These events are likely to have driven more traffic to Clicklane during the September-end quarter, thereby boosting the company’s performance.
However, rising operating expenses amid an increasing selling, general and distribution (SG&A) expenses and amortization cost is expected to have dented Asbury’s cash flows and overall margins during the quarter. Apart from this, soaring commodity costs and lack of inventory at the dealerships amid the global chip shortage are likely to have further dented margins during the quarter under review.
Stocks With Favorable Combinations
Here are a few companies in the auto space that you may want to consider, as our model shows that these have the right combination to post an earnings beat in the upcoming releases:
Penske Automotive PAG has an Earnings ESP of +9.29% and currently carries a Zacks Rank #2. The company is set to report third-quarter 2021 earnings on Oct 27.
Sonic Automotive SAH has an Earnings ESP of +5.51% and holds a Zacks Rank of 2, at present. The company will release quarterly figures on Oct 28.
Group 1 Automotive GPI has an Earnings ESP of +2.78% and carries a Zacks Rank #2, currently. The company’s third-quarter 2021 results are scheduled to be out on Oct 28.
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Penske Automotive Group, Inc. (PAG): Free Stock Analysis Report
Group 1 Automotive, Inc. (GPI): Free Stock Analysis Report
Sonic Automotive, Inc. (SAH): Free Stock Analysis Report
Asbury Automotive Group, Inc. (ABG): Free Stock Analysis Report
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