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ASBURY AUTOMOTIVE GROUP INC (ABG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered mixed headline results: adjusted EPS of $7.43 beat Wall Street consensus ($6.86), while revenue of $4.373B modestly missed ($4.453B). EBITDA exceeded consensus, supported by strong Parts & Service and improving used retail GPUs (estimates marked with *; Values retrieved from S&P Global).
  • Operational execution improved: SG&A as % of gross profit fell 198 bps YoY to 63.2% (adjusted 63.6%), with fourth consecutive sequential improvement in same‑store used retail GPU and record Parts & Service gross profit ($355M) .
  • Strategic portfolio actions advanced: Asbury closed the Herb Chambers acquisition (valued at ~$1.45B; 2024 adjusted EBITDA $176.8M) and divested nine stores (net proceeds $250–$270M), increasing scale in a stable luxury‑heavy region while prioritizing leverage reduction over the next 12–18 months .
  • Guidance updates: management now expects a 25.5% effective tax rate in Q3–Q4, ~$250M CapEx in both 2025 and 2026 (subject to tariff outcomes), continued SG&A in the mid‑60s for 2025, and full Tekion DMS conversion targeted by 2027; TCA deferral headwinds were $0.43/share in Q2 and timing has been revised with Koons rollout in early Q4 .
  • Near‑term stock narrative hinges on tariff clarity and Herb Chambers integration; management expects new vehicle GPUs to trend toward $2,500–$3,000 over time (with optimism toward ~$3,000), a key margin watch item for investors .

What Went Well and What Went Wrong

What Went Well

  • Record Parts & Service profitability: Parts & Service gross profit hit an all‑time high ($355M); same‑store gross profit up 7% with margin expansion (59.2%, +53 bps) .
  • Used retail profitability: same‑store used retail gross profit per unit rose to $1,729 (+15% YoY), marking the fourth consecutive sequential improvement; front‑end yield held at $4,861 .
  • Cost discipline: SG&A as % of gross profit improved to 63.2% (adjusted 63.6%); management reiterated focus on employee productivity and outside services, even while absorbing ~$2M Tekion implementation/testing costs .
  • Management quote: “I commend our team members for their sustained focus on growth, profitability and cost discipline… we welcomed The Herb Chambers Automotive Group… entering a new region with a flagship group” .

What Went Wrong

  • Top‑line softness vs consensus: revenue of $4.373B increased 3% YoY but missed Street ($4.453B*), with F&I PVR down 3% YoY to $2,084 and used retail units down 6% YoY .
  • New vehicle margin pressure: total new vehicle gross margin fell to 6.9% (−22 bps YoY), with import/domestic GPU compression; management expects further normalization of new vehicle GPUs toward $2,500–$3,000 over time .
  • TCA deferral headwind: non‑cash deferral reduced EPS by $0.43 in Q2; revised rollout timing (Koons in early Q4) shifts deferral cadence, adding forecasting complexity for near‑term EPS .

Financial Results

Headline vs Prior Periods and Estimates

MetricQ4 2024Q1 2025Q2 2025Q2 2025 Consensus*
Revenue ($USD Millions)$4,504.5 $4,148.5 $4,373.1 $4,453.2*
Gross Profit ($USD Millions)$749.9 $724.2 $751.9 —
GAAP Diluted EPS ($USD)$6.54 $6.71 $7.76 —
Adjusted Diluted EPS ($USD)$7.26 $6.82 $7.43 $6.86*
Operating Margin %5.3% 5.6% 5.9% —
Adjusted Operating Margin %5.7% 5.8% 5.8% —
SG&A as % of Gross Profit63.6% 63.0% 63.2% —
Adjusted SG&A as % of Gross Profit63.0% 64.0% 63.6% —
  • EPS: beat (Adjusted $7.43 vs $6.86*). Revenue: miss ($4,373.1M vs $4,453.2M*). EBITDA: beat (Adjusted $255.8M vs $250.9M*) .
  • Q2 EBITDA (Company adjusted) $255.8M; Street EBITDA consensus $250.9M* .

Estimates disclaimer: Values retrieved from S&P Global.

Segment Breakdown (Q2 2025 vs Q2 2024)

SegmentRevenue ($MM) Q2’24Revenue ($MM) Q2’25YoY %Gross Profit ($MM) Q2’24Gross Profit ($MM) Q2’25YoY %
New Vehicle$2,164.9 $2,303.9 +6% $155.1 $160.0 +3%
Used Retail$1,167.2 $1,129.4 −3% $56.4 $62.3 +11%
Used Wholesale$140.9 $156.3 +11% $4.6 $6.6 +43%
Parts & Service$580.9 $601.5 +4% $339.9 $354.8 +4%
F&I (net)$192.4 $182.0 −5% $174.7 $168.1 −4%
Total$4,246.2 $4,373.1 +3% $730.7 $751.9 +3%

KPIs

KPIQ4 2024Q1 2025Q2 2025
New Vehicle Units47,255 41,496 44,437
Used Retail Units35,328 35,415 36,233
Used-to-New Ratio74.8% 85.3% 81.5%
New Vehicle ASP ($)$51,996 $51,525 $51,846
Used Retail ASP ($)$31,106 $30,465 $31,171
F&I PVR ($)$2,236 $2,261 $2,084
Front-End Yield ($)$4,939 $4,852 $4,840
Total Gross Margin %16.6% 17.5% 17.2%
Parts & Service Margin %57.6% 58.3% 59.0%
New Vehicle Gross Margin %7.0% 6.7% 6.9%
Used Retail Gross Margin %4.7% 5.2% 5.5%
Days Supply (New / Used)49 / 37 44 / 31 59 / 37

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax RateQ3–Q4 2025Not specified~25.5%Updated higher vs Q2’s 25%
SG&A as % of Gross ProfitFY 2025Not specifiedMid‑60sMaintained outlook with tariff caveats
Capital ExpendituresFY 2025 / FY 2026Not specified~$250M each yearNew; subject to tariff impact
TCA Rollout (Koons)Early Q4 2025Prior timing not finalizedEarly Q4 rolloutRevised timing; affects deferral cadence
TCA Deferral EPS ImpactQ2 2025Not applicable−$0.43/shareNew headwind disclosed; future timing revised
Leverage TargetMid–Late 2026Target range in placeBelow higher end of range by mid–late 2026Updated deleveraging timeline
Tekion DMS ConversionThrough 2027OngoingFull conversion targeted by 2027Timeline reiterated/updated
Capital Structure CapacityPost‑ChambersPrior facilitiesRevolver $925M; New vehicle floor plan $2.25BIncreased capacity post‑deal
Share RepurchasesOngoingOpportunisticOpportunistic, balanced with deleveragingMaintained stance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Tariffs/MacroFocus on efficiency; margins normalizing “Tariff uncertainty” backdrop; resilience Consumers buying ahead of possible tariff‑driven price hikes; GPUs trending to $2.5k–$3k over time Cautious
Parts & ServiceRecord growth; margin expansion CP +5%; stable growth Same‑store GP +7%; margin 59.2%; fixed absorption >100% Improving
Used Retail StrategyVolume up Q4; GPU down Units −8%; prioritizing profitability 4th consecutive sequential GPU improvement; prioritize unit profitability amid constrained supply Improving GPU; volume constrained
Technology (Tekion/APC)SG&A improvement focus Continued digital execution (Clicklane) Koons conversion complete; ~$2M Q2 costs; full benefits post‑2027; positive APC 2.0 feedback Building
Capital Allocation/LeverageShare buybacks; liquidity Liquidity $964M; net leverage 2.75x Close Chambers; divest 9 stores; liquidity $1.1B; deleveraging plan 12–18 months Scaling with deleveraging
EV Credit/AllocationNot highlightedNot highlightedOEMs planned for credit sunset; EV DSI declining; balanced allocations Neutral
GeographyBroader footprintNot highlightedNo California expansion planned; New England seen as stable luxury market Strategic stability

Management Commentary

  • CEO on portfolio and execution: “We have taken strategic steps to optimize our portfolio… we welcomed The Herb Chambers Automotive Group… enter a new region… with a flagship group” .
  • COO on used retail profitability: “Used retail gross profit per unit was $1,729… fourth quarter of sequential growth… we still plan to prioritize unit profitability” .
  • CFO on EPS and TCA: “Adjusted EPS was $7.43… non‑cash deferral headwind due to TCA was $0.43 per share… adjusted EPS would have been $7.86 without the deferral” .
  • CEO on Tekion: “When we're fully converted, which will hopefully be in 2027, is when we really recognize the SG&A benefits” .
  • CFO on CapEx/leverage: “We anticipate approximately $250 million in CapEx for both 2025 and 2026… expect to be below the higher end of our [leverage] range in mid to late 2026” .

Q&A Highlights

  • New vehicle GPUs and tariffs: management expects GPUs to normalize to $2,500–$3,000; tariff timing and OEM pricing adjustments will be key through the 2026 model year .
  • SG&A drivers: focus on employee productivity and outside services; Tekion conversion and SOC controls added $2M of Q2 costs ($1M implementation/duplication, ~$1M audit) .
  • Parts & Service outlook: comfort with mid‑single‑digit growth through 2H despite tougher warranty comps; CP and throughput support trajectory; warranty margins generally higher than CP .
  • Herb Chambers integration: luxury‑weighted, stable New England market; scope to improve efficiencies over time; strategic defensive positioning .
  • Capital structure: revolver lifted to $925M; new vehicle floor plan to $2.25B; divested nine stores ($250–$270M proceeds) to reduce leverage .

Estimates Context

  • Q2 2025: Adjusted EPS beat ($7.43 vs $6.86*), Revenue missed ($4,373.1M vs $4,453.2M*), Adjusted EBITDA beat ($255.8M vs $250.9M*) (estimates marked with *; Values retrieved from S&P Global).
  • Estimate revisions likely: higher parts & service profitability and lower SG&A underpin EPS upward bias; revenue trajectory depends on tariff impacts and F&I PVR; TCA deferral timing introduces near‑term EPS variability .

Key Takeaways for Investors

  • EPS quality improving: cost discipline and Parts & Service strength drove an EPS beat vs consensus despite revenue softness; watch SG&A trajectory as Tekion costs phase and conversions progress .
  • Margin watch: management’s GPU normalization path ($2.5k–$3k) suggests front‑end margin reversion; offset from Parts & Service margin expansion (59.2%) and used retail GPU improvements .
  • Strategic scale: Herb Chambers adds ~$176.8M 2024 adjusted EBITDA and luxury skew in a stable region; integration plus divestitures support deleveraging over 12–18 months .
  • Liquidity/Leverage: $1.1B liquidity and expanded facilities post‑deal provide flexibility; management targets leverage below the high end of the range by mid–late 2026 .
  • TCA dynamics: Q2’s −$0.43/share deferral headwind and revised rollout timing can mask underlying performance short‑term; longer‑term EPS accretion from TCA remains intact per management .
  • Tariff sensitivity: near‑term demand/pricing and F&I PVR bear monitoring; management expects OEM pricing adjustments with 2026 model year; narrative likely driven by tariff clarity and day‑supply stabilization .
  • Technology execution: full Tekion conversion by 2027 should lower SG&A and improve efficiencies; early conversions incurred ~$2M in Q2 costs but feedback is positive .

Appendix: Additional Data Points

  • Liquidity at Q2 end: $1.1B (cash/floorplan offset + availability), transaction‑adjusted net leverage 2.46x .
  • Days supply: New 59; Used 37 at Q2 end .
  • Brand mix (Q2 revenue): Luxury 30%; Imports 40%; Domestic 30% .
  • TCA pre‑tax income: $7M; deferral impact −$11M (−$0.43/share) in Q2 .

Estimates disclaimer: Values retrieved from S&P Global.