Markets & Finance

Wachovia Ups Group 1 Automotive to Outperform


From Standard & Poor's Equity Research

Wachovia upgraded Group 1 Automotive (GPI) to outperform from market perform, explaining that the company is poised to show strong cost leverage in 2007.

Analyst Richard Kwas expects to see the company implement a combination of initatives such as cost control and margin expansion. Also, he thinks Toyota's strong product cadences in 2006/2007 should benefit the company's same-store sales growth and boost its gross margins. He raises his $4.25 2007 earnings per share (EPS) estimate to $4.75 and his gross margin estimate to 16.7%. He also notes improving performance in used and new vehicles, and also to lesser extent in parts and service. He believes new estimates are achievable given the company's new product launches, back-office consolidation, and improved efficiency across business lines.


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