This is an old version of GPI from 13 days ago (Oct 31, 2026).See the latest version
GPI
- Price
- $260.80
- Discount category
- Well below intrinsic value
- Next earnings
- Jan 28, 2027
- Next earnings is estimate
- Yes
- Company name
- Group 1 Automotive
- Sector
- Auto dealerships
- About
- Group 1 Automotive owns and runs car dealerships in the United States and the United Kingdom. In October 2026, it had 256 dealerships, 319 franchises and 33 collision centers that sell 38 brands, and Toyota and Lexus were the largest brands in Q3 2026. It sells new and used cars and light trucks, arranges loans and leases, sells service contracts, repairs cars and sells parts. New and used car sales give most of the revenue, but parts and service and finance and insurance give a large part of the gross profit. Parts and service gross profit was $392.0 million in Q3 2026, at a gross margin of 55.9%. Group 1 buys dealerships in groups in the same city, a cluster strategy, to cut costs and share staff. It finances its car inventory with floorplan loans from banks and car makers' finance companies.
- Thesis
- The market prices Group 1 for lower profits per car while high interest rates and high car prices make cars hard to afford. In Q3 2026, total gross profit fell 7.1%, new vehicle gross profit per car fell 5.4% to $3,074, used retail units fell 10.5%, and adjusted EPS fell to $9.36 from $10.45. US adjusted SG&A rose to 67.7% of gross profit, from 65.8% a year earlier. At the same time, Group 1 added debt to buy the Hennessy dealerships in Atlanta for about $1.3 billion, and it closed that purchase on October 19, 2026. Before the closing, the company's own pro forma net leverage ratio was 4.2 times. Investors fear that profits keep falling while debt is higher. For the gap to close, three things must be true. Gross profit per car must stop falling, and used car volumes must stabilize. US adjusted SG&A must come back to the 66.4% of gross profit of Q2 2026 or lower, with the $50 million of yearly cost cuts in place. Hennessy must add its expected $1.7 billion of yearly revenue and earnings, and the sale of dealerships that do not fit the strategy, with about $360 million of expected proceeds, must lower leverage. The Q4 2026 report, expected in early 2027, is the first quarter with Hennessy, and the 2027 quarterly reports show whether leverage falls. If profits per car stabilize, the gap can close over the next four to six quarters. If high rates keep cars hard to afford for longer, profits can stay low and the higher debt adds risk.
- Risks
- High interest rates and high car prices make cars hard to afford. In Q3 2026, used retail units fell 10.5% and new vehicle gross profit per car fell 5.4% from a year earlier. A weaker consumer or more price competition can cut profits further. Debt rose with the Hennessy purchase. Group 1 issued $1.25 billion of new notes at 6.250% and 6.625% in September 2026 and used them to pay for Hennessy on October 19, 2026. Its pro forma net leverage ratio including Hennessy was 4.2 times for the 12 months to June 30, 2026. Higher interest costs lower earnings, and less cash is left for buybacks. Group 1 must integrate the 10 large Hennessy dealerships that it bought on October 19, 2026. Hennessy's figures were provided by Hennessy and are not audited, and the price can change after a true-up within 90 days of the closing. About 29% of new vehicle units were sold in the UK in Q3 2026. The UK market has its own rules for electric vehicle sales, a different economy and currency risk. Car makers decide on franchise approvals, supply of cars and incentives. A change in a car maker's sales model, such as more direct sales, or a supply problem can hurt dealer profits.
- Balance sheet
- Cash: $882M Debt: $3.9B Net debt: $3.0B Interest cover: 3.1× Group 1 funds its car inventory with floorplan loans, $2,123.8 million net of $153.0 million in offset accounts at September 30, 2026, which are not in debt here because the cars secure them and they move with inventory. Debt is total debt as the Q3 2026 release states it, $3,886.2 million at September 30, 2026. The release does not split it into its parts. It includes the $1.25 billion of notes due 2032 and 2035 that Group 1 issued on September 22, 2026. Cash was $881.5 million at September 30, 2026, because Group 1 held the note proceeds until it paid for Hennessy on October 19, 2026 with the notes and cash on hand. Interest cover is income from operations divided by floorplan and other interest expense for the first nine months of 2026. The $3.5 billion revolving credit facility matures on May 30, 2030. The company's pro forma figures with Hennessy show adjusted EBITDA of $1,038.8 million for the 12 months to June 30, 2026, and a net leverage ratio of 4.2 times. After September 30, 2026, Group 1 sold US dealerships for about $235 million and agreed to sell four more for about $125 million, and it said that these proceeds support its plan to lower leverage. Group 1 pays a quarterly dividend of $0.55 per share and had $306.3 million left on its buyback authorization at September 30, 2026. As of Sep 30, 2026.
- Checkpoints
- Oct 19, 2026: Hennessy purchase closes. Passed. Watch: Closing by the end of 2026 with all approvals passes; a delay past January 6, 2027 that forces the redemption of the 2032 notes fails. Outcome: Group 1 completed the Hennessy purchase on October 19, 2026, for about $1.3 billion. Oct 28, 2026: Q3 2026 results: gross profit per car and costs. Failed. Watch: New vehicle gross profit per car that stops falling and US adjusted SG&A near 66% of gross profit pass; another large fall in gross profit and EPS fails. Outcome: New vehicle gross profit per car fell 5.4% to $3,074, US adjusted SG&A rose to 67.7% of gross profit, and adjusted EPS fell to $9.36 from $10.45. Jan 28, 2027 (estimate): Q4 2026 results: first quarter with Hennessy and leverage. Pending. Watch: Stable same store gross profit and a lower leverage ratio after the Hennessy closing pass; falling same store profits with higher leverage fail.
- Recent events
- Oct 28, 2026: Group 1 reported Q3 2026 results. Revenue was $5.4 billion, down 6.7%. Diluted EPS from continuing operations was $8.59, and adjusted EPS was $9.36, down from $10.45. New vehicle gross profit per car fell 5.4% to $3,074, and used retail units fell 10.5%. US same store customer pay parts and service revenue grew 3.2%. After the quarter, Group 1 sold US dealerships of the Lexus, Acura and Honda brands for about $235 million and agreed to sell four more US dealerships for about $125 million, to lower leverage. In the UK, it agreed with Jaguar Land Rover to keep five JLR dealerships that it had planned to give up. It bought back no shares in the quarter. Oct 27, 2026: Conifer Management reported that it owned 2,012,290 shares, about 16.9% of Group 1's shares. It paid about $41.6 million for the shares that it bought after its report of September 29, 2026. Oct 19, 2026: Group 1 completed the purchase of the 10 Hennessy dealerships, one collision center and related real estate in Atlanta for about $1.3 billion. It paid with the $1.25 billion of new senior notes and cash on hand, and $80.0 million of the price went into an indemnity escrow account. Sep 29, 2026: Conifer Management reported that it owned about 15.4% of Group 1's shares on September 25, 2026, up from about 9.7% on August 20, 2026. It paid about $80 million for the shares that it bought after September 22, 2026. Sep 23, 2026: Group 1 Realty, a subsidiary, signed a term loan with Bank of America for up to $190.3 million, equal to 85% of the appraised value of the mortgaged dealership properties, at Term SOFR plus 1.45%. Sep 22, 2026: Group 1 closed a $1.25 billion offering of senior unsecured notes: $625 million at 6.250% due 2032 and $625 million at 6.625% due 2035. The money pays for the Hennessy purchase. If the purchase does not close by January 6, 2027, or a later date that the purchase agreement allows, Group 1 must redeem the 2032 notes. Sep 22, 2026: Group 1 agreed to appoint Benjamin Hart of Conifer Management, one of its largest shareholders, to its Board from November 1, 2026. The agreement with Conifer includes standstill and voting terms. On August 20, 2026, Conifer had reported that it owned about 9.7% of the shares. Aug 11, 2026: Group 1 appointed David Kimbell, former CEO of Ulta Beauty, to its Board, and declared a quarterly dividend of $0.55 per share, in line with a 10% higher yearly dividend of $2.20 per share in 2026. Jul 30, 2026: Group 1 agreed to buy the 10 dealerships, one collision center and related real estate of Hennessy Automobile Companies in Atlanta for about $1.3 billion, plus remaining inventory. The dealerships sell brands such as Lexus, Jaguar Land Rover and Porsche and have about $1.7 billion of yearly revenue. Group 1 expects to close by the end of 2026, after regulatory and car maker approvals. Jul 30, 2026: Group 1 reported Q2 2026 results. Revenue was $5.4 billion, down 5.6%. Diluted EPS from continuing operations was $8.62, and adjusted EPS was $9.61, down from $11.52. The CEO said results softened because of consumer affordability issues. Group 1 completed its $50 million yearly cost cut in the US and bought back no shares in the quarter. Apr 30, 2026: Group 1 reported Q1 2026 results. Revenue was $5.4 billion, down 1.8%. Adjusted diluted EPS from continuing operations was $8.66, down from $10.17. The CEO said that high interest rates and high car and gasoline prices hurt affordability, and the company started cost cuts in the US and the UK.