Sign in
AA

ASBURY AUTOMOTIVE GROUP INC (ABG)·Q3 2025 Earnings Summary

Executive Summary

  • Record quarter: revenue $4.80B (+13% y/y), gross profit $803M (+12%), gross margin 16.7%; GAAP diluted EPS $7.52 and adjusted EPS $7.17 .
  • EPS beat; revenue slightly below consensus: EPS $7.17 vs $6.84*; revenue $4.80B vs $4.84B*; EBITDA consensus also below actual; strength driven by luxury mix, Herb Chambers integration, and EV tax credit pull-forward in new volumes (Values retrieved from S&P Global).
  • Same-store Parts & Service remained a core engine: gross profit +7% y/y, margin expanded +172 bps to 58.8% .
  • Guidance/tone: New vehicle GPU expected to normalize to $2,500–$3,000; Q4 effective tax rate ≈25.5%; 2025 CapEx trimmed to ≈$175M; TCA deferral outlook revised—path to ~$5 EPS contribution now tied to SAR recovery, likely around 2031 .
  • Capital allocation: ~$50M buybacks in Q3; management prioritizing deleveraging over the next 12 months while staying opportunistic on repurchases and portfolio optimization .

What Went Well and What Went Wrong

What Went Well

  • Record revenue and gross profit; adjusted operating margin held at 5.5% despite integration and Techyon/Tekion rollout costs .
  • Fixed operations execution: same-store Parts & Service gross profit +7% y/y; margin expanded to 58.8%; fixed absorption above 100% .
  • Luxury and acquisition synergy: Herb Chambers’ heavier luxury mix lifted PVRs; management: “their gross profits on new vehicles and used vehicles is the lead platform in our organization” .

What Went Wrong

  • Gross margin compressed 23 bps y/y to 16.7% amid EV mix and lower new GPUs; same-store new vehicle GPU fell to $3,188 (down y/y) .
  • SG&A leverage under pressure from implementation and professional fees: SG&A as % of gross profit 65.7% (adjusted 64.2%) .
  • Used retail volume softness and execution set as a near-term opportunity: same-store used units down 4% y/y; management focusing on sourcing and profitability until the used pool recovers (2026–2028) .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$4.15 $4.37 $4.80
GAAP Diluted EPS ($)$6.82 $7.43 $7.52
Adjusted EPS ($)$6.82 $7.43 $7.17
Gross Profit Margin (%)17.5% 17.2% 16.7%
Adjusted Operating Margin (%)5.8% 5.8% 5.5%
Consensus vs ActualQ1 2025Q2 2025Q3 2025
EPS Consensus Mean ($) vs Actual6.66* vs 6.82 6.86* vs 7.43 6.84* vs 7.17
Revenue Consensus Mean ($USD Billions) vs Actual4.35* vs 4.15 4.45* vs 4.37 4.84* vs 4.80

Values retrieved from S&P Global.

Segment breakdown (Q3 y/y):

SegmentQ3 2024Q3 2025
Dealerships Revenue ($MM)$4,159.7 $4,719.8
TCA Revenue ($MM)$77.0 $81.1
Segment Operating Income – Dealerships ($MM)$192.4 $213.9
Segment Operating Income – TCA ($MM)$17.8 $19.6

Key KPIs

KPIQ1 2025Q2 2025Q3 2025
F&I PVR ($)$2,263 $2,096 $2,182
Front-End Yield ($/vehicle)$4,854 $4,861 $4,776
Parts & Service Gross Margin (%)58.3% 59.2% 59.0%
New Vehicle Days Supply (days)44 59 58
Used Vehicle Days Supply (days)31 37 35

Non-GAAP adjustments (Q3):

  • Adjusted net income excludes: $27M gain on divestitures, $9M non-cash impairment, $9.6M professional fees, $2.2M Tekion implementation, $2.3M acquisition-related deferred tax true-up; GAAP diluted EPS $7.52 → adjusted $7.17 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
New Vehicle GPUOngoingTrend to $2,500–$3,000 over time Maintain $2,500–$3,000 expectation; timing sensitive to macro Maintained
Effective Tax RateQ4 2025≈25.5% (2H indication) ≈25.5% Maintained
CapExFY 2025≈$250M (Q2 commentary) ≈$175M; timing-dependent; 2026 CapEx update post Q4 Lowered
TCA EPS Accretion Timeline2029 targetPrior outlook implied ~$5+ EPS in 2029; interim deferral impacts under review ~$5 EPS now tied to SAR ~17M; likely around 2031; near-term deferral impacts lower Deferred/Lower near-term
Deleveraging HorizonNext 12–18 months12–18 months (post-Chambers) Next 12 months; business cash generation supports pace Slightly accelerated emphasis
Share RepurchasesOngoingOpportunistic alongside deleveraging $50M in Q3; prioritization vs debt depends on share price/returns Active/Opportunistic

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Tekion (Techyon) DMS rolloutPilot expanded; Koons conversion completed; benefits: fewer bolt-ons, SG&A savings over time 23 stores on Techyon; full rollout targeted by end of 2026/early 2027; SG&A savings realized on software by Q4; efficiency gains more visible by late 2026–early 2027 Progressing; savings shift from 2025–2027
TCA (F&I) deferral impact2025–2029 under review; deferral headwind began in Q1/Q2 Revised outlook: lower near-term deferral hit; path to ~$5 EPS contingent on SAR recovery; likely around 2031 Deferral shifted later; sensitivity to SAR
Tariffs/MacroQ1 pull-forward late March; OEM responses varied; inventory managed; cautious SG&A guardrails EV demand doubled vs Q2 ahead of credit expiry; management expects luxury to be seasonally strong; affordability and labor market are watchpoints Demand mixed; luxury seasonal strength expected
Product/luxury mixLuxury weighting accretive to GPUs; Park Place/Koons synergy Chambers luxury mix lifted PVRs; Lexus strongest luxury brand; Q4 luxury expected to be strong Positive luxury tailwind
Regional trendsD.C./Baltimore softness in Q1; West strong in fixed ops Inventories balanced; same-store new day supply 58 days; continued focus on used velocity Stable; execution focus
Regulatory/legalCDK litigation constrained rollout previously Litigation “reached the point” enabling continued migration to new DMS Constraint easing, rollout enabled

Management Commentary

  • “Our acquisition of the Herb Chambers Group has already had a positive impact… the heavier weighting towards luxury brands.”
  • “Same-store SG&A… was 63.6%, a decrease of 32 basis points. Our strategy… deleveraging the balance sheet, optimizing the portfolio, and being opportunistic with share repurchases.”
  • CFO: “Adjusted EPS was $7.17… the non-cash deferral headwind due to TCA this quarter was $0.23 per share.”
  • CEO on luxury: “Traditionally, the fourth quarter is a great quarter for luxury… at this point, we think our margins will hold up well.”
  • CEO on Tekion savings timeline: “We should fully realize the savings of the software costs by Q4… efficiency gains… end of the first quarter of 2027.”

Q&A Highlights

  • EV mix and GPUs: EV unit volume doubled vs Q2; EV GPU significantly lower than ICE/hybrids; management still expects Q4 luxury strength and resilient margins .
  • TCA trajectory: Prior 2029 ~$5+ EPS accretion revised; biggest impact is SAR moving from 17M to high-15s/low-16s; ~$5 EPS likely ~2031 absent acquisitions .
  • SG&A leverage: Near-term implementation costs (Tekion, audits) pulled forward; once rollout completes, productivity gains should reduce SG&A over time .
  • Capital allocation: Ranking share repurchases vs debt reduction depends on valuation/returns; portfolio optimization via divestitures continues .
  • Used execution: Same-store used units -4% y/y; focus on internal sourcing (85% sourced internally) and velocity; pool recovering from 2026 onward .

Estimates Context

  • EPS: Q3 actual adjusted EPS $7.17 vs consensus $6.84* → beat; Q2 $7.43 vs $6.86* → beat; Q1 $6.82 vs $6.66* → beat (Values retrieved from S&P Global).
  • Revenue: Q3 $4.80B vs $4.84B* → slight miss; Q2 $4.37B vs $4.45B* → miss; Q1 $4.15B vs $4.35B* → miss (Values retrieved from S&P Global).
  • Estimate counts: ~7 EPS and revenue estimates for each quarter* (Values retrieved from S&P Global).

Key Takeaways for Investors

  • Quality beat on EPS alongside record revenue/gross profit; margin resilience amid EV mix shifts and integration costs is constructive .
  • Fixed operations remain a defensive pillar (58.8–59.2% margins) supporting cash generation and deleveraging into 2026 .
  • Near-term headwinds: EV mix pressures GPUs; implementation/professional fees keep SG&A elevated; revenue slightly below consensus—watch sequential margin/SG&A trajectory .
  • Positive catalysts: Luxury seasonality in Q4; Chambers accretion; accelerating Tekion rollout with savings and productivity gains expected to ramp through 2026–2027 .
  • TCA outlook reset reduces near-term deferral drag; long-term EPS accretion preserved contingent on SAR or M&A—scenario-sensitive but ultimately supportive of multi-year EPS growth .
  • Capital allocation balanced: $50M buybacks, active portfolio optimization, deleveraging focus—potential for multiple expansion if execution on SG&A/productivity materializes .
  • Trading lens: Near-term emphasis on margin durability and SG&A cadence; medium-term thesis anchored on fixed ops stability, tech-driven efficiencies (Tekion), and TCA monetization path .
Note: Asterisks (*) denote values retrieved from S&P Global.