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Chicago, IL – October 27, 2021 – At present, Zacks Fairness Analysis discusses Auto – Retail and Wholesale, together with Lithia Motors, Inc. LAD, AutoNation, Inc. AN, Group 1 Automotive, Inc. GPI and Sonic Automotive, Inc. SAH.


The Zacks Auto Retail and Entire Gross sales {industry} is within the quick lane amid sturdy automobile demand, courtesy of an increase in client spending and choice for private mobility. The hovering reputation of electrical autos is spiking gross sales volumes. In the meantime, the shift towards digital procuring has been rising at warp pace, thereby boosting gross sales.

As a brand new period of dealership consolidation is underway, many automobile retail biggies need to purchase smaller supplier teams for scale enlargement and business synergies. Amid the tailwinds, prospects of {industry} individuals like Lithia Motors, AutoNation, Group 1 Automotive and Sonic Automotive seem vivid.

Trade Overview

The automotive sector’s efficiency depends upon its retail and wholesale community. By dealership and retail chains, corporations within the Zacks Auto Retail and Wholesale {industry} perform a number of duties. These embody the sale of latest and used autos, gentle vans in addition to auto elements, execution of restore and upkeep providers together with the association of auto financing.

The {industry}, being client cyclical, relies on enterprise cycles and financial circumstances. Customers and companies spend extra on big-ticket gadgets once they have larger disposable revenue.

Quite the opposite, when revenue is tight, discretionary bills are the primary to be slashed. Importantly, the coronavirus pandemic has introduced appreciable adjustments within the working atmosphere, with the {industry} laying extra emphasis on e-commerce retailing, and the pattern is right here to remain.

3 Key Traits

Sturdy Demand: Consumers’ urge for food for private autos is kind of sturdy and is prone to stay so amid financial restoration, and choice for personal transportation over public/shared conveyance means. Client spending is on the rise, with Individuals being far more assured to make discretionary purchases.

As such, larger gross sales of autos are boosting the {industry}’s prospects. Additionally, with zero-emission autos getting fashionable by the day and the electrical automobile charging infrastructure on a roll, customers at the moment are capable of overcome vary nervousness and are actively trying to buy eco-friendly automobiles, which augur nicely for the {industry}’s development.

E-commerce Ramp-up: The method of shopping for automobiles has undergone a digital transformation, with on-line gross sales getting ever so fashionable, due to the pandemic. Auto sellers are ramping up their digital capabilities to make offers with clients and organize for dwelling deliveries of autos.

The launch of a easy, safe and user-friendly on-line platform is aiding in seamless end-to-end digitization of the businesses’ gross sales processes. The race to speculate huge sums within the e-commerce area is gathering steam, propelling companies to succeed in new heights.

Flurry of M&A Actions: A wave of consolidation is sweeping throughout the auto retail {industry}. Dealership transactions have been up 27% 12 months over 12 months to 144 in first-half 2021, per Kerrigan. The dealership consulting agency expects a surge in deal making throughout the {industry} within the second half.

Huge retailers which are flush with money are in search of to scoop up smaller rivals in a hope that a rise in scale would assist them lead digital transformation and increase aggressive benefit. Latest buyout offers like Group 1-Prime Automotive, Sonic-RFJ Auto, and Asbury-Larry Miller, amongst others, have generated quite a lot of buzz.

Zacks Trade Rank Instills Optimism

The Zacks Auto Retail & Wholesale {industry} is a nine-stock group inside the broader Zacks Auto-Tires-Vans sector. The {industry} presently carries a Zacks Trade Rank #11, which locations it within the prime 4% of greater than 250 Zacks industries.

The group’s Zacks Trade Rank, which is principally the typical of the Zacks Rank of all of the member shares, signifies vivid near-term prospects. Our analysis reveals that the highest 50% of the Zacks-ranked industries outperform the underside 50% by an element of greater than 2 to 1.

The {industry}’s positioning within the prime 50% of the Zacks-ranked industries is a results of a constructive earnings outlook for the constituent corporations in mixture. Wanting on the mixture earnings estimate revisions, it seems that analysts are upbeat about this group’s earnings development potential. Since June 30, the {industry}’s earnings estimates for 2021 have elevated 48.3%.

Earlier than we current just a few shares that you could be wish to take into account to your portfolio, let’s check out the {industry}’s latest stock-market efficiency and valuation image.

Trade Outshines S&P 500 & Sector

The Zacks Auto Retail & Wholesale {industry} has rallied 78.5% over the previous 12 months, comfortably surpassing the Zacks S&P 500 composite and the sector’s development of 35.3% and 31.6%, respectively.

Trade’s Present Valuation

Since automotive corporations are debt laden, it is smart to worth them based mostly on the EV/EBITDA (Enterprise Worth/ Earnings earlier than Curiosity Tax Depreciation and Amortization) ratio.

On the premise of the trailing 12-month enterprise worth to EBITDA (EV/EBITDA), the {industry} is presently buying and selling at 7.33X in contrast with the S&P 500’s 16.24X and the sector’s 11.93X.

Over the previous 5 years, the {industry} has traded as excessive as 9.99X, as little as 4.28X and at a median of seven.46X.

4 Distinguished Picks

AutoNation: One of many main auto retailers in the US, AutoNation presently sports activities a Zacks Rank #1 (Robust Purchase). A powerful footprint, massive supplier community, retailer enlargement efforts, model extension technique and alliances bode nicely for AutoNation. The buyouts of Precedence 1 Automotive and Peacock Automotive Group are set so as to add $420 million and $380 million, respectively, to AutoNation’s annualized revenues.

With the launch of its digital platform AutoNation Categorical, the corporate has stepped up its digitization recreation. Price-cut initiatives, a powerful steadiness sheet and investor-friendly strikes additionally increase shareholders’ confidence. The Zacks Consensus Estimate for 2021 earnings and gross sales signifies a year-over-year uptick of 124.3% and 27.2%, respectively. You may see the whole listing of right now’s Zacks #1 Rank shares right here.

Lithia: Lithia, which presently carries a Zacks Rank #2 (Purchase), is among the key names within the auto retail house. A spree of acquisitions introduced Lithia’s complete annualized revenues acquired to $6.2 billion to this point this 12 months, holding it nicely forward of the schedule specified by the five-year plan rolled out in July 2020.

Enhanced digital options — together with the Driveway e-commerce program — are serving to Lithia to additional increase profitability and market presence. Its sturdy money move and strong dividend historical past are praiseworthy. The agency’s bold plan to generate $50 billion in revenues and $50 in earnings per share by 2025 instills optimism. The Zacks Consensus Estimate for 2021 earnings and gross sales signifies a year-over-year uptick of 100.6% and 71.1%, respectively.

Group 1: One other notable automotive retailer, Group 1 operates primarily in the US, U.Okay. and Brazil. The approaching acquisition of Prime Automotive Group will diversify its U.S. foothold and improve this Zacks Rank #2 firm’s world dealership depend to 220. 12 months to this point, Group 1 has accomplished $6550 million of acquired revenues and the proposed transaction is predicted to take its complete acquired revenues to greater than $2.5 billion.

The AcceleRide platform, Group 1’s on-line retailing initiative, is yielding constructive outcomes. Continued concentrate on operational self-discipline and dedication to extend shareholder worth are different positives. The Zacks Consensus Estimate for 2021 earnings and gross sales signifies a year-over-year uptick of 83% and 25.3%, respectively.

Sonic: Used and new automobile retailer, Sonic presently carries a Zacks Rank #2. Sonic’s EchoPark unit is a serious development engine. The auto retailer goals to retail between 100,000 and 105,000 items in 2021, and expects the EchoPark unit to account for 20-25% of complete 2021 revenues, indicating a rise from 15% in 2020.

Importantly, Sonic targets 575,000 items in gross sales and $14 billion in annual EchoPark revenues by 2025, with a nationwide distribution community of greater than 140 shops. The approaching buyout of RFJ Auto Companions is predicted so as to add $3.2 billion to Sonic’s annual revenues and catapult the agency into the highest 5 largest dealership teams in the US. The Zacks Consensus Estimate for 2021 earnings and gross sales signifies a year-over-year uptick of 96% and 28%, respectively.

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Previous efficiency is not any assure of future outcomes. Inherent in any funding is the potential for loss. This materials is being offered for informational functions solely and nothing herein constitutes funding, authorized, accounting or tax recommendation, or a suggestion to purchase, promote or maintain a safety. No suggestion or recommendation is being given as as to if any funding is appropriate for a specific investor. It shouldn’t be assumed that any investments in securities, corporations, sectors or markets recognized and described have been or might be worthwhile. All data is present as of the date of herein and is topic to vary with out discover. Any views or opinions expressed might not replicate these of the agency as a complete. Zacks Funding Analysis doesn’t have interaction in funding banking, market making or asset administration actions of any securities. These returns are from hypothetical portfolios consisting of shares with Zacks Rank = 1 that have been rebalanced month-to-month with zero transaction prices. These aren’t the returns of precise portfolios of shares. The S&P 500 is an unmanaged index. Go to for details about the efficiency numbers displayed on this press launch.

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AutoNation, Inc. (AN) : Free Inventory Evaluation Report
Group 1 Automotive, Inc. (GPI) : Free Inventory Evaluation Report
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