# Asbury Automotive (ABG)

Sector: Auto dealerships

| Field | Value |
|---|---|
| Price | $169.87 |
| Fair value (Analysts) | $315.00 |
| Discount to fair value | 46.1% |
| Fair value uncertainty (Analysts) | High |
| Economic moat (Analysts) | Narrow |
| LSEG analyst rating (1 strong buy to 5 strong sell) | 2.67 |
| Data as of | 2026-10-16 |
| Next earnings | 2026-10-28 (estimate) |

## In short

The market prices Asbury for lower dealer profits and a costly software change, and lower costs after the Tekion rollout ends in fall 2026 can close the gap.

## Themes and gap

- Themes: Weak consumer (weak-consumer), Tariffs and trade (trade-tariffs), Regulation and courts (regulation-legal)
- Gap type: Can close (closable)
- Why: The end of the Tekion rollout in fall 2026 and the next two to four quarterly reports show whether costs fall back and leverage drops.

## About

Asbury Automotive Group is one of the largest car dealer groups in the United States. At June 30, 2026, it operated 158 new vehicle dealerships with 202 franchises for 34 vehicle brands, and 37 collision repair centers. It sells new and used vehicles, and it repairs and services vehicles and sells parts. It also arranges vehicle loans through third-party lenders and sells add-on products such as service contracts. Its own company, Total Care Auto, Powered by Asbury, provides service contracts and other vehicle protection products. Most gross profit comes from parts and service and from finance and insurance, because new and used vehicles earn low margins. Asbury also buys and sells dealerships to change its store portfolio.

## Thesis

The market prices Asbury for lower dealer profits and for the risk of its change to new dealer software. The company is moving all stores from the CDK dealer management system to Tekion. About 70% of stores used Tekion on July 28, 2026, and the rest are planned for fall 2026. The change adds costs and lowers store productivity while staff learn the new system. In Q2 2026, adjusted EPS fell 15% from a year earlier to $6.82, and SG&A rose to 67.2% of gross profit from 63.2% a year earlier. Transaction adjusted net leverage also rose to 3.4 times at June 30, 2026, from 3.2 times at March 31. For the gap to close, three things must be true. The Tekion rollout must finish in fall 2026 without a new large disruption. SG&A as a share of gross profit must move back toward the 63% level of 2025 during 2027, as the converted stores improve. Used vehicle, parts and service, and finance and insurance gross profit must keep growing, so that leverage falls from 3.4 times. The first evidence comes with the Q3 2026 report, estimated for about October 28, 2026. The Q4 2026 report in early 2027 is the first full quarter after the rollout. If these checks pass, the gap can close over the next four to six quarters. The main reason it may not close is weaker vehicle demand or an adverse result in the FTC case on add-on products.

## Checkpoints

- Oct 28, 2026 (estimate): Q3 2026 earnings: Tekion rollout and costs. Status: Pending. Watch: SG&A as a share of gross profit lower than the 67.2% of Q2 2026 and the Tekion rollout on plan for fall 2026 pass; a higher cost share or a delay in the rollout fails.
- Feb 15, 2027 (estimate): Q4 2026 earnings: first quarter after the rollout. Status: Pending. Watch: Adjusted EPS growth from a year earlier and transaction adjusted net leverage below 3.4 times pass; a further fall in adjusted EPS or higher leverage fails.

## Balance sheet

- Cash: $36M
- Debt: $3.5B
- Net debt: $3.4B
- EBITDA, last 12 months: $952M
- Net debt / EBITDA: 3.6× (medium)
- Interest cover: 4.4×
- Debt due within 12 months: $448M

Asbury funds its vehicle inventory with floor plan notes and funds the rest of the business with senior notes, real estate loans and a revolving credit facility. At June 30, 2026, total debt outstanding was $3.48 billion, with $2.25 billion of senior notes due from 2028 to 2032, $1.15 billion of real estate and mortgage loans, $70 million on the revolver and an $8 million finance lease. Debt includes the finance lease. Floor plan notes payable of $1.84 billion are left out of debt, because the vehicles in inventory secure them. Cash is cash and short-term investments, including $26 million held at Total Care Auto. Asbury also had $144 million in floor plan offset accounts, and total liquidity was $966 million with $782 million available on the revolver. EBITDA is adjusted EBITDA for the 12 months to June 30, 2026. Interest cover is operating income divided by other interest expense for the first half of 2026, without floor plan interest. With floor plan interest, it was about 3.0 times. The company's transaction adjusted net leverage ratio was 3.4 times at June 30, 2026. Asbury had about $322 million left on its share repurchase authorization at that date.

As of 2026-06-30.

Sources:

- https://www.sec.gov/Archives/edgar/data/1144980/000114498026000089/a2026q2ex991.htm
- https://www.sec.gov/Archives/edgar/data/1144980/000114498026000094/abg-20260630.htm

## Recent events

- 2026-08-31: Asbury named Wendy Reynolds-Dobbs as Senior Vice President and Chief Human Resources Officer, effective September 14, 2026. The former head of human resources, Jed Milstein, left the company on August 19, 2026, and will consult until the end of 2026.
- 2026-07-28: Asbury reported Q2 2026 results. Revenue was $4.4 billion. Net income fell 25% to $115 million, or $6.25 per diluted share, and adjusted EPS fell to $6.82 from $7.43. Asbury bought back about 668,000 shares for $131 million. About 70% of its stores used the Tekion system, and transaction adjusted net leverage was 3.4 times.
- 2026-05-04: Daniel Clara became President and Chief Executive Officer after the annual meeting, as the board decided in December 2025. David Hult, the former CEO, stays on the board. Stockholders also approved the removal of all supermajority voting requirements from the charter.
- 2026-04-28: Asbury reported Q1 2026 results. Net income was $188 million, or $9.87 per diluted share, which included a net gain of $94 million after tax from dealership sales. Adjusted EPS fell to $5.37 from $6.82. In the quarter, Asbury sold ten dealerships for net proceeds of about $210 million and ended seven franchises. More than 50% of stores used Tekion.

## Risks

- High: The change of all stores to the Tekion dealer management system adds costs and lowers productivity during the change. SG&A rose to 67.2% of gross profit in Q2 2026 from 63.2% a year earlier. If the rollout has new problems or the converted stores do not improve, costs can stay high.
- Medium: Since August 16, 2024, the FTC has an enforcement action against Asbury and three of its dealerships about the sale of add-on products. Asbury disputes the claims and sued the FTC on October 4, 2024. Both cases are still pending, and the company cannot predict the outcome.
- Medium: Vehicle sales depend on consumer demand, interest rates and vehicle prices. Tariffs on imported vehicles and parts can raise costs for Asbury and for the vehicle makers. Lower demand reduces new and used vehicle gross profit.
- Medium: Debt is high for a dealer. Long-term debt was $3.48 billion at June 30, 2026, and floor plan notes for vehicle inventory were another $1.84 billion. Transaction adjusted net leverage rose to 3.4 times from 3.2 times at March 31, 2026, while Asbury also buys back shares.

## Links

- Page: https://picks.kamadorueda.com/company/ABG/
- History of changes: https://picks.kamadorueda.com/company/ABG/history/
- JSON with full history: https://picks.kamadorueda.com/data/company/ABG.json

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