Asbury Earnings: We View the Market's Reaction as an Overreaction

We find Asbury’s stock falling 9.3% after it reported first-quarter earnings on April 25 to be excessive, so we are not changing our fair value estimate. Adjusted diluted EPS fell 9.7% year over year to $8.37 which still beat the $7.99 Refinitiv consensus. It should not be surprising that dealers’ earnings are declining year over year as used vehicle profitability remains challenged due to expensive inventory procurement costs, while new vehicle profitability gradually comes off record highs from the chip shortage. Same-store revenue fell by 1% with only new vehicle and service posting growth, but to us this is not a reason for the stock to fall as much as it did.