Wachovia Downgrades Auto Retailers: ABG, GPI, & SAH to Market Perform; Lowers EPS Estimates

June 10, 2008 9:15 AM EDT

Wachovia downgrades Asbury Automotive Group (NYSE: ABG), Group 1 Automotive (NYSE: GPI), and Sonic Automotive (NYSE: SAH) from Outperform to Market Perform. The firm left Penske Automotive Group (NYSE: PAG) at Outperform because of its growth prospects, operating expertise, and track record for delivery.

The primary reasons for the downgrade are: "1) Most companies have near-term earnings risk relative to consensus and 2008 guidance. 2) We believe the anticipated 2009 recovery will be more muted than expected. 3) We're off 12% from the sales peak and in the ’90-91 recession sales declined 21% from the peak in ’88. Given pressures on the consumer, yr./yr. sales are likely to decline for the balance of this year and possibly into early ’09. 4) The stocks have outperformed year-to-date while potential catalysts (interest rate declines, a material rebound in consumer confidence) have been exhausted or are not likely to occur during the rest of 2008."

These are the FY 2008 and 2009 EPS Revisions:
Asbury Automotive Group (NYSE: ABG): FY08 to $1.71 from $1.83 and FY09 to $1.86 from $2.15
AutoNation (NYSE: AN): FY08 to $1.20 from $1.30 and FY09 to $1.36 from $1.53
Group 1 Automotive (NYSE: GPI): FY08 to $2.90 from $3.15 and FY09 to $3.20 from $3.80
Lithia Motors (NYSE: LAD): FY08 to $0.70 from $1.00 and FY09 to $0.90 from $1.30
Penske Automotive Group (NYSE: PAG): FY08 to $1.65 from $1.70 and FY09 to $1.82 from $1.92
Sonic Automotive (NYSE: SAH) : FY08 to $2.16 from $2.40 and FY09 to $2.42 from $2.75

On average, Wachovia's 2008 and 2009 EPS estimates are 11% and 13% below the Street's consensus.

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