Asbury Automotive: Solid Q2 Leaves Shares Meaningfully Undervalued

Asbury Automotive Group remains a "Strong Buy," trading at ~9x earnings despite resilient, less-cyclical profits driven by its parts & service business. Q2 EPS of $6.82 beat by $0.51, with flat revenue and stable gross profit, as M&A offset slower vehicle sales; luxury outperformed, and used margins improved. Parts & service, comprising half of gross profit, demonstrated stability despite modest growth, reinforcing the sustainability of ABG’s earnings model. Leverage above target due to M&A, but buybacks reduced share count by 7%; capital returns may accelerate post-2027 as leverage normalizes.

Shares of Asbury Automotive Group (ABG) have been a disappointing performer over the past year, trading basically flat and missing out on a meaningful market rally. The auto dealers have struggled to garner a higher market multiple, leading