Craig-Hallum raises target for Asbury shares, highlights OEM cuts and storm impacts By Investing.com
On Wednesday, Craig-Hallum maintained a Hold rating on Asbury (NYSE:) Automotive Group (NYSE:ABG) and increased the target price to $260 from $240. The firm's analyst highlighted Asbury's strong performance for the third quarter despite facing several challenges including original equipment (OEM) sales, the impact of multiple hurricanes, the ongoing normalization of new vehicle gross profit per unit (GPU), and some issues with OEM Stellantis. (NYSE:).
The analyst noted that despite these constraints, the situation is improving, as there are recent hurricanes that lead to insurance premiums and a possible increase in the price of cars, GPU, and demand. OEM stop sales, affecting brands like Toyota (NYSE: ), Lexus, BMW (ETR: ), and Honda (NYSE: ), is expected to result in the failure of high-intent buyers, and high-quality warranty work. In addition, Stellantis has initiated measures to better support retailers by encouraging customers and reducing pressure on retailers' supply of goods.
The report suggests that these developments create an excellent environment for investment opportunities within the auto dealer sector, including Asbury. However, the decision to maintain a hold rating was influenced by concerns about rate increases and expected profit pressures in 2025 and 2026 related to TCA reform. The analyst expects a clearer financial picture for Asbury over time.
Asbury Automotive Group's third-quarter results showed resilience in the face of industry-wide challenges, and the firm's analyst expects current heads to shift to headwinds going forward. Despite the positive outlook on the sector, Craig-Hallum advises caution due to the financial challenges presented in the coming years.
In other recent news, Asbury Automotive Group has been the subject of several developments. CFRA adjusted its 12-month price target for Asbury from $260.00 to $230.00, maintaining a hold rating. This adjustment followed a reduction in earnings per share forecasts for the coming years and reported third quarter earnings per share of $6.35, a decline from the same period last year. In addition, Asbury Automotive obtained a court order forcing CDK Global (NASDAQ: ) LLC to transfer dealer data to Tekion Corp, a move that could impact the company's strategic direction and efficiency.
Stephens initiated coverage on Asbury, assigned an Equal Weight rating and set a $216 target price. The company projects year-over-year declines in EBITDA and earnings per share for Asbury through 2025, with growth expected in 2026. Meanwhile, the US Federal Trade Commission (FTC) filed a lawsuit against Asbury, alleging triple discriminatory pricing practices to sell its cars in Texas. Asbury intends to appeal the lawsuit.
Asbury reported record total revenue of $4.2 billion and recording parts and service revenue of $581 million, despite a CDK outage that temporarily disrupted operations. The company's adjusted net income for the quarter was $236 million, with adjusted earnings per share of $6.40.
InvestingPro Insights
Asbury Automotive Group's financial metrics and market performance provide additional context to Craig-Hallum's analysis. According to InvestingPro data, the company's market capitalization reaches $4.65 billion, with a P/E ratio of 7.81 for the last twelve months from Q2 2024. This very low P/E ratio would suggest that the stock is not undervalued, aligned and Craig. -Hallum's target price increased.
The company's revenue growth of 13.46% in Q2 2024 shows its growth potential despite the challenges mentioned in the article. However, InvestingPro Tip notes that Asbury is operating with a heavy debt load, which may explain Craig-Hallum's concerns about the rate increase.
Another InvestingPro Tip indicates that analysts predict the company will be profitable this year, supporting the overall positive outlook. However, it is worth noting that 4 analysts have revised their earnings down in the future, which may be related to the expected profit pressure mentioned in the article.
For investors looking for a comprehensive analysis, InvestingPro offers 6 additional tips for Asbury Automotive Group, providing a deeper understanding of the company's financial health and market conditions.
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