Asbury Finishes 2022 on a Good Note

Asbury Automotive ended 2022 with a strong fourth quarter, giving us no reason to change our fair value estimate. We will revisit all modeling assumptions after the 10-K is filed. Adjusted diluted EPS rose 22% year over year to $9.12, easily beating the $8.21 Refinitiv consensus. The company has now lapped the year-over-year comparisons with the late December 2021 acquisition of Larry H. Miller, so 40% revenue growth in the fourth quarter (up 1% same store) should be down significantly year over year in 2023 unless another large deal occurs. Same-store gross profit declined 2% as new-vehicle gross profit per unit fell 11% to $5,684 on flat volume while used-vehicle GPU declined 31% to $1,842. New-vehicle profit has been very inflated due to the chip shortage, which has caused very high used-vehicle prices that have also squeezed used margins. This dynamic should unwind throughout 2023 and 2024. CEO and president David Hult said new-vehicle inventory recovery will be faster this year for domestic makers like Stellantis, while a slower recovery is on tap for Toyota and Honda. Hult expects 2023 U.S. light-vehicle sales in the mid-14 million range, consistent with our expectation.