DULUTH, Ga. - Asbury (NYSE:ABG) Automotive Group (NYSE: ABG), a major player in the U.S. automotive retail and service sector, has obtained a court order mandating CDK Global (NASDAQ:CDK) LLC to transfer dealership data to Tekion Corp. This development is a result of a lawsuit filed by Asbury against CDK, which had previously refused to share data for a pilot program involving four Asbury dealerships. The program is designed to explore alternative Dealership Management System (DMS) services, a critical component in managing dealership operations.
The court's decision enables Asbury to proceed with the pilot, which aims to assess the effectiveness of Tekion’s services, a competitor to CDK in the DMS market. Barry Cohen, Asbury's Vice President and Chief Information Officer, expressed satisfaction with the court's ruling, emphasizing the importance of testing new business products to enhance the car-buying and servicing experience for customers and staff.
Asbury is a Fortune 500 company with headquarters in Duluth, Georgia. As of September 30, 2024, it operates 153 new vehicle dealerships across 31 domestic and foreign vehicle brands, along with 37 collision repair centers. Additionally, Asbury provides vehicle protection products through Total Care Auto, Powered by Landcar. It is recognized for its rapid growth and as an excellent workplace by various publications.
The recent court directive underscores the competitive dynamics within the DMS industry and Asbury's commitment to innovation and customer service improvement. This legal development could potentially influence the company's strategic direction and operational efficiency.
The information in this article is based on a press release statement from Asbury Automotive Group.
In other recent news, Asbury Automotive Group reported a record total revenue of $4.2 billion and record parts and service revenue of $581 million, despite a CDK outage that temporarily disrupted operations. The outage is estimated to have impacted diluted earnings per share by $0.95 to $1.15 for the quarter. Nevertheless, the company's adjusted net income for the quarter reached $236 million, with an adjusted earnings per share of $6.40.
Meanwhile, Stephens initiated coverage on Asbury, assigning the stock an Equal Weight rating and setting a price target of $216. The firm projects year-over-year declines in EBITDA and earnings per share for Asbury through 2025, with a forecast for EBITDA to grow by approximately 4% and EPS by around 9% in 2026, driven by the company's share repurchase program.
In addition, the U.S. Federal Trade Commission (FTC) has filed a lawsuit against Asbury, alleging discriminatory pricing practices at three of its car dealerships in Texas. The FTC claims Black and Latino customers were charged higher prices than other consumers for add-on products and services, often without their consent. Asbury, which operates over 155 dealerships across more than a dozen states, intends to contest the lawsuit. These are among the recent developments involving Asbury Automotive Group.
InvestingPro Insights
Asbury Automotive Group's recent legal victory against CDK Global LLC aligns with the company's focus on innovation and operational efficiency. This commitment is reflected in Asbury's financial performance, as evidenced by recent InvestingPro data.
According to InvestingPro, Asbury's revenue growth stands at 6.9% over the last twelve months as of Q2 2024, with quarterly revenue growth reaching 13.46% in Q2 2024. This growth trajectory supports the company's efforts to enhance its services and explore new technologies like alternative DMS providers.
Despite these positive indicators, InvestingPro Tips highlight that Asbury "operates with a significant debt burden" and "suffers from weak gross profit margins." The company's gross profit margin is reported at 17.75% for the last twelve months as of Q2 2024. These factors may explain Asbury's drive to improve operational efficiency through initiatives like the Tekion pilot program.
On a positive note, another InvestingPro Tip indicates that Asbury has shown "strong return over the last five years," suggesting that the company's long-term strategies have been effective. This track record of success may provide confidence in Asbury's current efforts to innovate and improve its dealership management systems.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights on Asbury Automotive Group. In fact, there are 5 more InvestingPro Tips available for ABG, providing a deeper understanding of the company's financial health and market position.
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