S&P revises Asbury Auto view to stable

S&P said it revised the outlook for Asbury Automotive Group Inc. to stable from negative, citing better-than-expected earnings for the first nine months of the year.

“Despite a 5% year-over-year decline in same-store sales during its third quarter, Asbury’s operating margin and free cash flow were up significantly. The major factors behind the recent increase in the company’s profit were significant improvements in its new and used vehicle margins and substantial cost leverage as selling, general, and accounting (SG&A) expenses as a percent of gross profit decreased by 780 basis points to 61.1% in the third quarter,” S&P said in a press release.

The agency said it sees Asbury’s debt to EBITDA on track to approach 3x-3.5x by the end of 2021 while maintaining free operating cash flow to debt of over 10% through a combination of debt reduction and EBITDA recovery.

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