The automotive dealership industry is expected to see a weaker Q1 performance due to weather disruptions and softer vehicle sales, BofA Securities said in a note on Monday.
The firm said Q1 earnings per share estimates for Asbury Automotive (ABG), AutoNation (AN), Group 1 Automotive (GPI), Penske Automotive (PAG), Sonic Automotive (SAH), and Lithia Motors (LAD) have been reduced by an average of 13%. This mainly reflects weather disruptions in late January and February, which affected both vehicle sales and parts and service.
Same-store new unit sales are now expected to decline by 5.4% on average, also due to tough comparisons from pre-buying ahead of tariffs implemented at the end of March 2025, BofA added.
For Q2, same-store new unit sales are projected to decline by 1.8% on average, again reflecting difficult comparisons from April of last year due to pre-buying before tariff-related price increases. Key risks to recovery include lower consumer confidence linked to the Iran War and higher gas prices, which historically affect US auto sales.
The firm added that AutoNation remains a top pick heading into earnings, as its store footprint was less affected by weather disruptions. There is also potential upside to EPS from share buybacks, which may offset higher selling, general, and administrative expenses.
BofA lowered price targets of Asbury Automotive to $238 from $255, Group 1 Automotive to $390 from $430, Lithia Motors to $320 from $335, and Penske Automotive to $185 from $200.
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