Group 1 Automotive Hikes Dividend: Is the Stock Worth Buying Now?

Core Viewpoint - Group 1 Automotive (GPI) has increased its annual dividend for 2025 to $2 per share, reflecting a 6% rise from the previous year, which is indicative of the company's financial strength and commitment to shareholder returns [1][2]. Dividend and Financial Performance - The quarterly dividend of 50 cents per share will be distributed on March 17, 2025, to shareholders on record as of March 3, 2025 [1]. - GPI has raised dividends 11 times in the last five years, with an annualized growth rate of 12.5%, and maintains a sustainable payout ratio of just 5% [2]. - Year-to-date, GPI shares have increased by 11.2%, outperforming the Zacks Retail – Wholesale sector's 8.3% and the Zacks Automotive – Retail and Wholesale industry's 10.6% [3]. Stock Valuation and Trends - GPI shares are currently undervalued with a Value Score of A, trading at a forward price/sales ratio of 0.29x compared to the sector's 1.67x [7]. - The stock is trading above both the 50-day and 200-day moving averages, indicating a bullish trend [9]. Strategic Acquisitions and Aftersales Growth - GPI has integrated 54 new stores and two corporate organizations in Q4 2024, with total acquired revenues of approximately$ 4 billion, including the Inchcape buyout expected to contribute $2.7 billion in annualized revenues [12]. - The aftersales business has become a key profitability driver, with Q4 2024 revenues and gross profit showing year-over-year growth, alongside a 6.5% increase in repair orders [13]. Partnerships and Revenue Sources - GPI has established strong partnerships with major automotive brands, enhancing its competitive edge and product offerings [14]. - Key brands such as Toyota, General Motors, and Ford contribute 19%, 9%, and 7% of GPI's total revenues, respectively, providing diversification against market fluctuations [15]. Earnings and Revenue Estimates - The Zacks Consensus Estimate for GPI's Q1 2025 EPS is$ 9.67, reflecting a 1.9% year-over-year growth, with revenues estimated at $5.29 billion, indicating an 18.43% increase [17]. - For full-year 2025, the EPS estimate is$ 40.86, up 1.2% over the past month, with revenues projected at $21.83 billion, representing a 9.52% year-over-year growth [18]. Macroeconomic Challenges - The U.K. automotive market faces challenges due to government-imposed zero-emissions vehicle mandates, which have not been met, creating pressure on new vehicle sales [19]. - Geopolitical uncertainties, including tariffs and trade restrictions, pose additional risks to GPI's cost structure and profitability [20].