Asbury Automotive Shares Popped: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Georgia's Asbury Automotive Group (NYS: ABG) were looking peachy today, gaining as much as 10% in intraday trading after the company reported fourth-quarter results.
So what: On an adjusted basis, Asbury's fourth-quarter earnings per share jumped 46%, to $0.54. Total revenue for the quarter was up just 8% year over year to $1.1 billion, but used vehicle operations shone, climbing 21% with an 18% increase in same-store revenue. Used car sales accounted for 28% of the company's total revenue for the quarter compared to 56% for new cars, but used car sales were more profitable for the company.
For the quarter, Wall Street analysts had been expecting earnings per share of $0.43 on revenue of $1.09 billion.
Now what: Fearful consumers are consumers less likely to make a big outlay -- or a big finance commitment -- for a new car, whether that new car is truly new or just new to that particular buyer. The success of used cars for Asbury underscores this point as consumers that are in need of a car are more likely opting for the lower prices they can get on used cars. The numbers look good for Asbury today, but they could look even better if the economy continues to improve.
In the meantime, selling more used cars might be a good thing for Asbury. While used cars are slightly more profitable than new cars, parts and services are far more profitable than either and older cars on the road could mean more business for that arm of the company.
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