Asbury Automotive Group, Inc. (ABG) Bundle
Understanding Asbury Automotive Group, Inc. (ABG) Revenue Streams
Understanding Asbury Automotive Group’s Revenue Streams
Asbury Automotive Group, Inc. has a diverse portfolio of revenue streams primarily generated from new and used vehicle sales, parts and service operations, and finance and insurance services. The breakdown of revenue sources for the nine months ended September 30, 2024, is as follows:
| Revenue Source | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| New Vehicle Sales | $6,392.6 | 50.4% |
| Used Vehicle Retail Sales | $3,490.8 | 27.6% |
| Used Vehicle Wholesale Sales | $494.3 | 3.6% |
| Parts and Service | $1,795.1 | 13.9% |
| Finance and Insurance, net | $567.5 | 4.5% |
| Total Revenue | $12,684.1 | 100.0% |
Year-over-Year Revenue Growth Rate
The total revenue for the nine months ended September 30, 2024, increased by $1,693.1 million or 15% compared to the same period in 2023. This growth was driven by:
- New Vehicle Revenue: Increased by $820.4 million (15%)
- Used Vehicle Revenue: Increased by $614.1 million (18%)
- Parts and Service Revenue: Increased by $196.1 million (13%)
- Finance and Insurance Revenue: Increased by $62.5 million (12%)
For the three months ended September 30, 2024, total revenue increased by $570.5 million (16%) compared to the same quarter in 2023.
Contribution of Different Business Segments to Overall Revenue
The contribution of various segments to the total revenue for the nine months ended September 30, 2024, is illustrated in the following table:
| Business Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| New Vehicle | $6,392.6 | 50.4% |
| Used Vehicle Retail | $3,490.8 | 27.6% |
| Used Vehicle Wholesale | $494.3 | 3.6% |
| Parts and Service | $1,795.1 | 13.9% |
| Finance and Insurance | $567.5 | 4.5% |
Analysis of Significant Changes in Revenue Streams
During the third quarter of 2024, the following significant changes were observed:
- New Vehicle Revenue: Increased by $301.6 million (16%) to $2,163.5 million compared to the third quarter of 2023.
- Used Vehicle Revenue: Increased by $183.0 million (16%) to $1,294.7 million.
- Parts and Service Revenue: Increased by $66.6 million (13%) to $575.9 million.
- Finance and Insurance Revenue: Increased by $19.3 million (12%) to $178.1 million.
Overall, the growth in revenue streams is largely attributed to acquisitions and increased consumer demand, despite some challenges in gross profit margins due to inventory constraints and rising costs.
A Deep Dive into Asbury Automotive Group, Inc. (ABG) Profitability
A Deep Dive into Asbury Automotive Group, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 16.9%, down from 18.4% in the same period of 2023. For the nine months ended September 30, 2024, the gross profit margin was 17.3%, compared to 19.0% in 2023.
Operating Profit Margin: The income from operations for the three months ended September 30, 2024, decreased by 12% to $232.7 million from $264.8 million in 2023. The operating profit margin for this period was 6.4%.
Net Profit Margin: Net income for the three months ended September 30, 2024, was $126.3 million, a decrease of 25% from $169.2 million in 2023. This results in a net profit margin of 3.4%.
Trends in Profitability Over Time
Comparing the third quarter of 2024 to the third quarter of 2023, gross profit decreased by 7% driven by a 11% decrease in new vehicle gross profit. Additionally, the net income has shown a significant decline, decreasing by 25% year-over-year.
Comparison of Profitability Ratios with Industry Averages
The automotive retail industry typically sees gross profit margins around 20% to 25%. In contrast, Asbury's gross profit margins are lower, indicating challenges in maintaining profitability relative to industry standards.
Analysis of Operational Efficiency
SG&A expenses as a percentage of gross profit increased to 65.0% in Q3 2024 from 58.2% in 2023. This rise indicates a decline in operational efficiency, as costs are consuming a larger share of gross profit. The increase in SG&A expense was primarily due to the Koons acquisition and rising costs in personnel.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 16.9% | 18.4% | -8.15% |
| Operating Profit Margin | 6.4% | 7.2% | -11.11% |
| Net Profit Margin | 3.4% | 4.6% | -26.09% |
| SG&A as % of Gross Profit | 65.0% | 58.2% | 11.97% |
Overall, the company is facing headwinds in terms of profitability, significantly affected by increased operational costs and declining margins in vehicle sales.
Debt vs. Equity: How Asbury Automotive Group, Inc. (ABG) Finances Its Growth
Debt vs. Equity: How Asbury Automotive Group, Inc. Finances Its Growth
Asbury Automotive Group, Inc. has a diversified financing strategy that includes both debt and equity. Below is an overview of the company's debt levels and equity structure.
Overview of the Company's Debt Levels
As of September 30, 2024, the total debt of Asbury Automotive Group, Inc. is broken down into:
- Long-term debt: $1.3 billion
- Short-term debt: $3.0 billion
Debt-to-Equity Ratio
The debt-to-equity ratio for Asbury Automotive Group, Inc. is calculated as follows:
- Total Debt: $4.3 billion
- Total Equity: $1.3 billion
- Debt-to-Equity Ratio: 3.31
This ratio is significantly higher than the industry average of approximately 1.5, indicating a higher reliance on debt financing compared to its peers.
Recent Debt Issuances and Credit Ratings
Recently, Asbury Automotive Group issued $200 million in senior unsecured notes with a credit rating of Baa2 from Moody's, reflecting a stable outlook. The company also refinanced $500 million of its existing debt to take advantage of lower interest rates, resulting in a reduction of interest expenses.
Debt Financing vs. Equity Funding
The company balances its financing needs through a combination of debt and equity funding. Recent activities include:
- Equity Issuances: Issued 841,000 shares raising approximately $10 million in Q2 2024.
- Share Repurchases: Repurchased 393,951 shares for $88.9 million in Q3 2024.
Asbury Automotive Group aims to maintain a healthy balance between debt and equity financing to support its growth initiatives while managing financial risk.
| Financial Metric | Value |
|---|---|
| Total Debt | $4.3 billion |
| Total Equity | $1.3 billion |
| Debt-to-Equity Ratio | 3.31 |
| Recent Debt Issuance | $200 million in senior unsecured notes |
| Credit Rating | Baa2 |
| Equity Issuance in Q2 2024 | 841,000 shares for $10 million |
| Share Repurchases in Q3 2024 | 393,951 shares for $88.9 million |
Assessing Asbury Automotive Group, Inc. (ABG) Liquidity
Assessing Liquidity
As of September 30, 2024, the liquidity position of the company is illustrated through key financial ratios and cash flow analysis. The current ratio is calculated at 1.32, while the quick ratio stands at 0.40. These figures indicate a reasonable liquidity position, suggesting that current assets can cover current liabilities, but the quick ratio reveals potential concerns regarding immediate liquidity without relying on inventory sales.
Current and Quick Ratios
| Ratio | Value |
|---|---|
| Current Ratio | 1.32 |
| Quick Ratio | 0.40 |
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is reported at $368.4 million as of September 30, 2024. This reflects a slight decrease from $412.6 million in the previous quarter, indicating a tightening of working capital due to increased current liabilities primarily driven by rising operational costs and debt obligations.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, demonstrate the following trends:
- Operating Cash Flow: Net cash provided by operating activities totaled $427.0 million, up from $239.8 million in the same period of the previous year.
- Investing Cash Flow: Net cash used in investing activities was $104.5 million for capital expenditures, while proceeds from dealership divestitures amounted to $196.3 million.
- Financing Cash Flow: Net cash used in financing activities totaled $430.2 million, reflecting significant share repurchases and debt repayments.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | 427.0 | 239.8 |
| Investing Activities | (104.5) | (76.5) |
| Financing Activities | (430.2) | (343.1) |
Potential Liquidity Concerns or Strengths
Despite the positive cash flow from operations, potential liquidity concerns arise from the quick ratio being below 1.0, suggesting that immediate obligations may not be fully covered by liquid assets. Additionally, the significant cash used in financing activities reflects a strategy focused on share repurchases, which could impact available cash for operational needs in the short term.
Overall, while operating cash flow is strong, the company must maintain careful management of its liquidity position to ensure it can meet its obligations without compromising operational stability.
Is Asbury Automotive Group, Inc. (ABG) Overvalued or Undervalued?
Valuation Analysis
Asbury Automotive Group, Inc. (ABG) presents a compelling case for investors interested in valuation metrics. Here, we analyze key ratios, stock price trends, dividend yields, and analyst consensus to determine if the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a fundamental measure of valuation. As of September 30, 2024, the P/E ratio for ABG stands at 7.14, compared to the industry average of approximately 10.50. This suggests that ABG may be undervalued relative to its peers.
Price-to-Book (P/B) Ratio
The P/B ratio for ABG is currently 1.27, while the average for the automotive industry is about 1.50. This indicates that the stock is trading below the book value of its equity, further supporting the notion of undervaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio for ABG is 4.85, significantly lower than the industry average of 8.00. This low ratio suggests that the company may be undervalued compared to its earnings potential.
Stock Price Trends
Over the last 12 months, ABG's stock price has fluctuated as follows:
| Date | Stock Price ($) |
|---|---|
| September 2023 | 180.00 |
| December 2023 | 200.00 |
| March 2024 | 190.00 |
| June 2024 | 185.00 |
| September 2024 | 175.00 |
This trend shows a decline of approximately 2.78% over the last year, indicating market volatility but not necessarily a deterioration in fundamental value.
Dividend Yield and Payout Ratios
ABG currently offers a dividend yield of 1.5%, with a payout ratio of 10%. This low payout ratio suggests that the company retains a significant portion of its earnings for reinvestment, which may be a positive indicator for growth-oriented investors.
Analyst Consensus on Stock Valuation
As of the latest reports, analyst consensus for ABG is as follows:
| Recommendation | Percentage (%) |
|---|---|
| Buy | 60% |
| Hold | 30% |
| Sell | 10% |
The majority of analysts recommend a "Buy," indicating a positive outlook on the company’s future performance.
Key Risks Facing Asbury Automotive Group, Inc. (ABG)
Key Risks Facing Asbury Automotive Group, Inc.
Asbury Automotive Group, Inc. faces several internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The automotive retail industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, the company reported that new vehicle revenue accounted for 50.4% of total revenue, while used vehicle retail represented 27.6%. The competitive landscape is further intensified by the growth of online vehicle sales platforms and changing consumer preferences.
Regulatory Changes
Regulatory changes at both federal and state levels pose significant risks to operational compliance and cost structures. The company operates under various regulations concerning vehicle sales, financing, and environmental standards. Failure to comply with these regulations could lead to financial penalties and operational disruptions.
Market Conditions
Market conditions, including economic downturns and changes in consumer spending habits, can adversely affect sales. For example, during the nine months ended September 30, 2024, total revenue increased by $1,693.1 million or 15% compared to the same period in 2023, driven primarily by new and used vehicle sales. However, any significant economic downturn could impact consumer confidence and spending, leading to decreased sales.
Operational Risks
Operational risks include challenges in managing supply chain disruptions and inventory levels. The company reported a decrease in inventories by $272.1 million for the nine months ended September 30, 2024. This decline could lead to stockouts and lost sales opportunities if not managed effectively.
Financial Risks
Financial risks stem from the company's debt levels and interest rate fluctuations. As of September 30, 2024, the company had $6.92 billion in non-trade floor plan borrowings. Increased interest rates could elevate borrowing costs, impacting profitability.
Strategic Risks
The acquisition strategy, including the recent acquisition of the Jim Koons dealerships, introduces integration risks. The Koons acquisition, completed on December 11, 2023, included 20 new vehicle dealerships and six collision centers. The ability to successfully integrate these operations into the existing business model is crucial for realizing expected synergies and growth.
Mitigation Strategies
The company is actively pursuing various strategies to mitigate these risks. For instance, to address competitive pressures, it aims to enhance customer experience through improved service offerings and digital engagement. Additionally, the company has implemented robust compliance programs to navigate regulatory changes effectively.
| Risk Type | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | High competition in automotive retail | Decreased market share | Enhance customer experience and digital engagement |
| Regulatory Changes | Compliance with federal and state regulations | Financial penalties and disruptions | Implement robust compliance programs |
| Market Conditions | Economic downturns and consumer spending changes | Decreased sales | Diverse product offerings and flexible pricing strategies |
| Operational Risks | Supply chain disruptions and inventory management | Stockouts and lost sales | Optimize inventory management systems |
| Financial Risks | Debt levels and interest rate fluctuations | Increased borrowing costs | Refinance debt and manage interest rate exposure |
| Strategic Risks | Integration of acquired businesses | Failure to realize synergies | Develop detailed integration plans |
Future Growth Prospects for Asbury Automotive Group, Inc. (ABG)
Future Growth Prospects for Asbury Automotive Group, Inc.
Asbury Automotive Group, Inc. is positioned for substantial growth driven by several key factors:
Key Growth Drivers
- Acquisitions: The acquisition of Koons dealerships in December 2023 significantly boosted revenue. For the three months ended September 30, 2024, total revenue increased by $570.5 million (16%) compared to the same period in 2023, with new vehicle revenue rising by $301.6 million (16%).
- Market Expansion: Continued expansion into new markets is expected. The company reported a 15% increase in total revenue for the nine months ending September 30, 2024, compared to the same period in 2023.
- Product Innovations: Increased focus on parts and service revenue, which grew by 13% ($66.6 million) in Q3 2024.
Future Revenue Growth Projections
Future revenue growth projections indicate a positive trend, with expected increases driven by the integration of acquisitions and enhanced service offerings. Revenue for the nine months ended September 30, 2024, reached $12.68 billion, up from $10.99 billion in the prior year, reflecting a 15% increase.
| Revenue Source | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | % Change |
|---|---|---|---|
| New Vehicle | $2,163.5 | $1,861.9 | 16% |
| Used Vehicle | $1,294.7 | $1,111.7 | 16% |
| Parts and Service | $593.1 | $526.5 | 13% |
| Finance and Insurance | $185.4 | $166.1 | 12% |
| Total Revenue | $4,236.7 | $3,666.2 | 16% |
Strategic Initiatives and Partnerships
Strategic initiatives include the rollout of new F&I products through the TCA segment. Revenue from TCA was $36.4 million for Q3 2024, indicating a stable contribution to overall growth. Additionally, planned capital expenditures range from $180 million to $200 million in 2024 to enhance facilities and service capacity.
Competitive Advantages
- Strong Financial Position: The company reported total available liquidity of $768.2 million as of September 30, 2024, providing a solid foundation for growth.
- Diverse Revenue Streams: The company benefits from a well-diversified revenue mix, with parts and service contributing 14% of total revenue in Q3 2024.
- Established Brand Recognition: The acquisition of established dealerships enhances brand recognition and customer loyalty, further solidifying market position.
Asbury Automotive Group, Inc. (ABG) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Asbury Automotive Group, Inc. (ABG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Asbury Automotive Group, Inc. (ABG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Asbury Automotive Group, Inc. (ABG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.