- Price
- $239.80
- Fair value
- $432.00
- Discount
- 44.5%
- Uncertainty
- High
- LSEG rating
- 2.31
- Moat
- Narrow
- Next earnings
- 2026-10-30
- 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 August 2026, it had 249 dealerships, 310 franchises and 32 collision centers that sell 37 brands, and Toyota and Lexus were the largest brands in Q2 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 $389.0 million in Q2 2026, at a gross margin of 56.2%. 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 Q2 2026, total gross profit fell 8.0%, new vehicle gross profit per car fell 8.5% to $3,254, used retail units fell 11.2%, and diluted EPS from continuing operations fell to $8.62 from $10.77. Costs did not fall as fast, so SG&A rose to 72.4% of gross profit. At the same time, Group 1 added debt to buy the Hennessy dealerships in Atlanta for about $1.3 billion plus inventory, and 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 stay near or below the 66.4% of gross profit of Q2 2026, with the $50 million of yearly cost cuts in place. The Hennessy purchase must close by the end of 2026, as planned, and add its expected $1.7 billion of yearly revenue and earnings, so that leverage falls with cash flow. The Q3 2026 report, expected at the end of October 2026, gives the first evidence, and the Hennessy closing and the Q4 2026 report in about February 2027 give the next. 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 Q2 2026, used retail units fell 11.2% and new vehicle gross profit per car fell 8.5% from a year earlier. A weaker consumer or more price competition can cut profits further.
Debt rises with the Hennessy purchase. Group 1 issued $1.25 billion of new notes at 6.250% and 6.625% in September 2026, and its pro forma net leverage ratio including Hennessy was 4.2 times. Higher interest costs lower earnings, and less cash is left for buybacks.
The Hennessy purchase needs regulatory and car maker approvals and must close by January 6, 2027, or a later allowed date, or Group 1 must redeem the 2032 notes. Group 1 must also integrate 10 large dealerships, and Hennessy's figures were provided by Hennessy and are not audited.
About 28% of new vehicle units were sold in the UK in Q2 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: $165M
Debt: $3.1B
Net debt: $2.9B
Interest cover: 3.2×
Undrawn credit line: $362M, to May 2030
Debt due within 12 months: $315M
Group 1 funds its car inventory with floorplan loans, $2,181.2 million net at June 30, 2026, which are not in debt here because the cars secure them and they move with inventory. Debt is the principal of its other debt at June 30, 2026: $750 million of 4.00% notes due August 2028, $500 million of 6.375% notes due January 2030, $809 million on the acquisition line of its $3.5 billion revolving credit facility, which matures on May 30, 2030, $1,015.8 million of mortgage loans and $16.8 million of other debt. It does not include $282.9 million of finance leases. Due within 12 months is the current maturities of long-term debt, including some leases. Interest cover is income from operations divided by floorplan and other interest expense for the first half of 2026. Total liquidity was $684.2 million at June 30, 2026, including $157.5 million in floorplan offset accounts and $362.1 million of capacity on the acquisition line. Group 1 was in compliance with its financial covenants. After that date, on September 22, 2026, Group 1 issued $1.25 billion of new notes, due 2032 and 2035, to pay for the Hennessy purchase, and on September 23 a subsidiary signed a mortgage term loan of up to $190.3 million. 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. Group 1 pays a quarterly dividend of $0.55 per share and had $306.3 million left on its buyback authorization at June 30, 2026.
As of 2026-06-30.
- Checkpoints
- Oct 30, 2026 (estimate): Q3 2026 results: gross profit per car and costs. Pending. 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.
Dec 2026 (estimate): Hennessy purchase closes. Pending. 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.
Feb 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
- 2026-09-23: 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%.
2026-09-22: 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.
2026-09-22: 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.
2026-08-11: 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.
2026-07-30: 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.
2026-07-30: 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.
2026-04-30: 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.