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Key Factors to Impact Group 1 Automotive (GPI) Q4 Earnings

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Group 1 Automotive (GPI - Free Report) is slated to release fourth-quarter and full-year 2020 results on Feb 4, before market open. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $5.84 per share on revenues of $3.02 billion.

This automotive retailer delivered stellar earnings in the last reported quarter on higher-than-anticipated revenues from the used-vehicle retail segment, and the parts and services segment.

The company has surpassed estimates in all of the preceding four quarters, the average surprise being 96.93%. This is depicted in the graph below:

Group 1 Automotive, Inc. Price and EPS Surprise

Group 1 Automotive, Inc. Price and EPS Surprise

Group 1 Automotive, Inc. price-eps-surprise | Group 1 Automotive, Inc. Quote

Trend in Estimate Revisions

The Zacks Consensus Estimate for Group1 Automotive’s fourth-quarter earnings per share significantly moved 30 cents north to $5.84 per share in the past 60 days. Moreover, this compares favorably with the year-ago quarter’s earnings of $3.01 per share, indicating a 94.02% surge, year on year. However, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year decline of 2.9%.

Earnings Whispers

Our proven Zacks model does not conclusively predict an earnings beat for Group 1 Automotive this time around. The 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, that is not the case here as elaborated below.

Earnings ESP: Group 1 Automotive has an Earnings ESP of -2.61%. This is because the Most Accurate Estimate is pegged 15 cents lower than 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: Group 1 Automotive currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Factors

The auto industry is influenced by many strong macroeconomic factors and is highly sensitive to overall strength of the economy. With the economy in an unhealthy state  and the second wave of coronavirus infections shooting up, customers are likely to have put discretionary expenses on hold for now. Consequently, the fourth-quarter performance of Group 1 Automotive might have been adversely impacted.

In fact, fourth-quarter revenues are expected to have declined in the used-vehicle retail and parts and services segments on a yearly as well as sequential basis, partly offset by a projected rise in the new vehicle retail segment.

The consensus estimate for revenues from used-vehicle retail sales for the October-December period is pegged at $806 million, suggesting a fall from the $838.8 million recorded in fourth-quarter 2019 and the $867 million recorded in the prior quarter.

Further, the Zacks Consensus Estimate for quarterly revenues from the parts and service segment is pinned at $375 million, calling for a fall from the $379.2 million reported in the prior-year period and the $376 million witnessed in the last quarter.

Nonetheless, for the quarter in discussion, the Zacks Consensus Estimate for revenues from the new vehicle retail sales, which has the highest contribution to the company’s revenues, is pegged at $1,710 million, indicating a jump from the $1,681.9 million reported in the year-ago period and the $1,581 million seen in the prior quarter. This is likely to have provided some respite to the fourth-quarter’s margins in the otherwise dismal scenario.  

Also, Group 1 Automotive’s diversified product mix, as well as rising e-commerce efforts aimed at enhancing customer shopping experience are likely to have boosted sales during the quarter to be reported.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

BorgWarner (BWA - Free Report) has an Earnings ESP of +2.94% and carries a Zacks Rank #3, currently. The company is scheduled to report quarterly numbers on Feb 11.

Allison Transmission Holdings (ALSN - Free Report) has an Earnings ESP of +7.44% and carries a Zacks Rank #3 at present. The company will announce fourth-quarter 2020 results on Feb 17.

Magna International (MGA - Free Report) has an Earnings ESP of +5.42% and currently flaunts a Zacks Rank of 1. The company is slated to release earnings numbers on Feb 19.

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