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Asbury Automotive Group ABG has inked a deal to acquire several automotive dealerships from The Herb Chambers Companies, one of the largest private dealership groups in the country.
The deal includes 33 dealerships, 52 car franchises and three repair centers. The sale is expected to be completed by late second quarter of 2025, subject to customary closing conditions. Asbury will finance the $1.34 billion acquisition via a mix of loans, mortgage funds and cash.
This acquisition will significantly expand ABG’s presence in the New England market, strengthen its position as a leading auto retailer in the United States, and is also likely to boost the company’s top-line growth.
In the trailing 12-month period, ABG shares have surged 38.7%, outperforming the Zacks Retail and Wholesale sector’s appreciation of 31% and the Zacks Automotive – Retail and Whole Sales industry’s return of 23.3%. The S&P 500 index has gained 23.5% in the same time frame.
Asbury shares have also outperformed industry peers like AutoNation AN, Rush Enterprises RUSHA and America’s CarMart CRMT in the trailing 12-month period.
While AN and RUSHA shares have surged 35.4% and 30.8%, respectively, CRMT shares have plunged 20.8%.
ABG’s exceptional performance can be attributed to its strong new vehicle sales, solid Parts & Service growth and rapid digital and technological advancements.
One Year Performance
Image Source: Zacks Investment Research
So is this the right time for investors to start accumulating the stock? Let us dig deep to find out.
Robust Sales Growth Bodes Well for Asbury
ABG is benefiting from solid growth in its new vehicle sales and profitability. In the fourth quarter of 2024, same-store new vehicle sales increased 7% year over year and 12% sequentially, with strong demand for its luxury brands as well as Hyundai, Kia, General Motors and Ford. The average new vehicle gross profit per unit was $3,661, helping sustain overall profitability.
Asbury’s Parts & Service segment has been delivering impressive results, with same-store gross profit rising 11% and the high-margin Customer Pay segment up 13% in the fourth quarter of 2024. This segment provides recurring revenues to ABG, making the business more resilient.
ABG’s Clicklane is allowing the company to differentiate itself by selling both new and used vehicles online. It has been seeing rapid growth, with 51,000 units sold in 2024, a 13% increase from 2023.
ABG Shares Undervalued
Asbury’s shares are undervalued, as suggested by the Value Score of A. In terms of the forward 12-month price/sales, the stock is currently trading at 0.34x, lower than the broader sector’s 1.68x.