Group 1 Automotive stock target raised to $460 by CFRA

Wednesday, Group 1 Automotive Inc . (NYSE:GPI), a specialty retail company with a market capitalization of $5.96 billion, saw its price target increased by CFRA analyst Garrett Nelson from $440.00 to $460.00, while the firm maintained a Hold rating on the stock. According to InvestingPro data, the stock is currently trading near its 52-week high of $458.82. The adjustment comes in the wake of the company’s fourth-quarter earnings report, which surpassed expectations with an adjusted EPS of $10.02, a 5.5% increase over the $9.50 figure from the same quarter the previous year and well above the consensus estimate of $9.11.

The earnings beat was attributed to a stronger-than-expected revenue, which climbed 24% to reach $5.55 billion, outpacing consensus by $270 million. Despite this top-line growth, the company experienced a slight contraction in gross margin, which fell 40 basis points to 15.9%, narrowly missing the consensus by 10 basis points. This aligns with InvestingPro’s analysis showing weak gross profit margins of 16.39% in the last twelve months, though the company maintains a "GOOD" overall financial health rating. The revenue increase was consistent across all segments, with each reporting over 20% growth.

Nelson’s new price target is based on a 2026 P/E ratio of 10.2x, which he considers a justified premium to the company’s historical averages. Currently trading at a P/E ratio of 12.1x, the stock has delivered impressive returns with a 66.73% gain over the past year. Investors seeking deeper insights into GPI’s valuation metrics and growth potential can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 US equities with detailed analysis and actionable intelligence. The Hold rating was reaffirmed after it was lowered from Buy last week due to Group 1 Automotive’s significant outperformance over the past two years and the belief that the current stock price already reflects an optimistic outlook for auto dealers, anticipating improved affordability and easing interest rates.

The report also highlighted that Group 1 Automotive’s share repurchase activity decelerated in the fourth quarter, with only $32 million in buybacks compared to an average of $43 million in the first three quarters of 2024. Nelson maintains the firm’s adjusted EPS estimate for 2025 at $41.75 and introduces an estimate of $45.05 for 2026.

In other recent news, Group 1 Automotive has exceeded Q4 earnings and revenue estimates. The Fortune 250 automotive retailer reported adjusted earnings per share of $10.02, surpassing the analyst consensus estimate of $9.09. Additionally, the company’s revenue for the quarter was $5.5 billion, a significant increase from the projected $5.2 billion.

These recent developments also include a record quarterly gross profit of $879.2 million, a 20.3% year-on-year increase. The company’s vehicle sales also reached an all-time high in 2024, with 413,364 retail new and used vehicles sold, marking a 13.8% increase over the previous year.

However, Group 1’s net income from continuing operations for Q4 was $94.6 million, a 13.1% decrease from Q4 2023, mainly due to impairment charges related to franchise rights for four U.S. dealerships. Despite this, Group 1’s President and CEO, Daryl Kenningham, praised the U.S. team for their high level of execution, particularly noting a 12.2% growth in parts and service revenue.

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