Group 1 Gains on Dealership Acquisition - Analyst Blog

Shares of Group 1 Automotive Inc. GPI gained 0.7% on May 19, after the company acquired the South Point Kia dealership in Austin, TX. The acquisition is expected to boost its revenues by about $55 million annually.

Other dealerships owned by Group 1 in Austin include Maxwell Ford, Town North Nissan and Round Rock Nissan. The company regularly acquires dealerships to expand its business and intends to pursue further acquisitions.

So far this year, Group 1 has acquired 6 franchisees and sold 1. The acquired franchisees are expected to increase its revenues by $295 million per annum, while the divestiture will lead to a loss of about $20 million in annual revenues.

Last month, Group 1 acquired the Alex Rodriguez Mercedes-Benz dealership in League City, TX. The company will rename the dealership, which is expected to generate annual revenues of $85 million, as Mercedes-Benz of Clear Lake. Concurrently, the company opened a new South Loop Hyundai dealership facility in Houston.

In January, Group 1 announced the acquisition of 2 dealerships – Heller Ford of Ford Motor Co. F and Heller Hyundai in Southern California. The dealerships will be renamed as Ford of Escondido and Hyundai of Escondido. The acquisitions are expected to boost annual revenues of Group 1 by $135 million.

As of May 19, 2014, Group 1 owns 152 automotive dealerships, 193 franchises, and 37 collision centers in the United States, the United Kingdom and Brazil. The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked automobile companies worth considering are Lithia Motors Inc. LAD and Asbury Automotive Group, Inc. ABG. Lithia carries a Zacks Rank #1 (Strong Buy), while Asbury Automotive carries a Zacks Rank #2 (Buy).