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

Group 1 Automotive GPI has raised its 2025 annual dividend to $2 per share. This represents a 6% increase from the 2024 dividend of $1.88 per share. As part of this increase, a quarterly dividend of 50 cents per share will be paid on March 17, 2025, to its stockholders who own shares as of March 3, 2025.This dividend increase signals financial strength and commitment to shareholder returns and is likely to boost investor confidence in GPI. Investors should note that the company has increased dividends 11 times in the last five years, with an annualized growth of 12.5%. The dividend looks quite sustainable, at a payout ratio of just 5%.In the year-to-date period, Group 1 shares have surged 11.2%, outperforming the Zacks Retail – Wholesale sector’s appreciation of 8.3% and the Zacks Automotive – Retail and Whole Sales industry’s return of 10.6%.GPI shares have been riding on its strategic acquisitions, strong performance in its U.S. operations and improved aftersales services.Year-to-Date PerformanceImage Source: Zacks Investment ResearchSo the question that arises is – is this the right time to start buying the GPI stock? Let’s dig deep to find out.Group 1 Shares UndervaluedGPI shares are undervalued, as suggested by the Value Score of A. In terms of the forward 12-month price/sales, the stock is currently trading at 0.29x, lower than the broader sector’s 1.67x.Price/Sales Ratio (F12M)Image Source: Zacks Investment ResearchGPI is also trading significantly above the 50-day and 200-day moving averages, indicating a bullish trend.GPI Trades Above 50-Day & 200-Day SMAsImage Source: Zacks Investment ResearchStrategic Acquisitions & Improved Aftersales Aid GPI’s ProspectsGroup 1 has adopted an aggressive expansion strategy, integrating 54 new stores and two corporate organizations in the fourth quarter of 2024 to increase its scale and geographic diversification. GPI’s total acquired revenues in 2024 were roughly $4 billion, including the Inchcape buyout, which is expected to add $2.7 billion in annualized revenues. These acquisitions are boosting GPI’s top-line growth. GPI has also been balancing acquisitions with share repurchases, having bought back 25% of its stock over the past three years.The company’s aftersales business has emerged as a key driver of profitability. Aftersales fourth-quarter 2024 revenues and gross profit outperformed sequentially and year over year. The quarter also saw a 6.5% increase in the number of repair orders. GPI has made significant investments in technician hiring and retention, increasing its technician headcount by 7% in the U.S. in 2024.Strong Partner Network Bodes Well for GPIGroup 1 has been benefiting from its strong partnerships with some of the world’s biggest automotive brands. The company has strengthened its footprint in the U.K. by acquiring dealerships for leading brands such as BMW, Volkswagen, Audi, Porsche, Mercedes-Benz, Toyota Motor TM, Land Rover, General Motors GM and Ford Motor F. These partnerships provide GPI with a competitive edge, allowing it to offer a varied portfolio of high-demand vehicles to its customers.Toyota Motor, General Motors and Ford Motor provide 19%, 9% and 7% of GPI’s total revenues, respectively. The diversity of Group 1’s brand partnerships reduces risks associated with market fluctuations and evolving consumer preferences.GPI’s 2025 Earnings & Revenue EstimatesThe Zacks Consensus Estimate for GPI’s first-quarter 2025 EPS is currently pegged at $9.67, down by 0.4% over the past 30 days but indicating growth of 1.9% on a year-over-year basis.The consensus mark for first-quarter revenues is pegged at $5.29 billion, indicating year-over-year growth of 18.43%.The Zacks Consensus Estimate for GPI’s full-year 2025 EPS is currently pegged at $40.86, up 1.2% over the past 30 days and indicating year-over-year growth of 4.21%.The consensus mark for 2025 revenues is pegged at $21.83 billion, indicating growth of 9.52% on a year-over-year basis.GPI beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed twice, the average surprise being 3.02%.Macroeconomic Uncertainties Pose Headwinds for GPIA challenging macroeconomic environment, particularly in the U.K., is posing as a major headwind for Group 1. The country’s automotive market is struggling with government-imposed zero-emissions vehicle mandates, which have proven difficult to achieve. The 2024 battery electric vehicle mix fell short of the mandated goal of 22%, and the 2025 target has been raised to 28%, creating further pressure on new vehicle sales.Furthermore, geopolitical uncertainties, particularly related to tariffs and trade restrictions, remain a concern. New tariffs under the U.S. administration can significantly impact GPI’s cost structure and pricing strategies, which can impact the company’s profitability.What Should Investors Do With GPI Stock?GPI is benefiting from its strategic acquisitions and strong aftersales business. Its Growth Score of B makes the stock attractive for growth-oriented investors. Shareholder-friendly moves also instill confidence.However, macroeconomic uncertainties and geopolitical tensions could weigh on the company’s prospects, likely to affect its performance in 2025. Also, declining gross margins in the new vehicle units are likely to weigh on the overall margins.GPI currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ford Motor Company (F): Free Stock Analysis Report Toyota Motor Corporation (TM): Free Stock Analysis Report General Motors Company (GM): Free Stock Analysis Report Group 1 Automotive, Inc. (GPI): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks