Auto dealers beat Street despite Japan supply

(Reuters) - U.S. auto dealer groups Group 1 Automotive Inc <GPI.N> and Asbury Automotive Group Inc <ABG.N> posted market-beating quarterly profit as tighter supply of Japanese cars led to higher prices and more used car sales.

While Japanese automakers are recovering from the March earthquake and tsunami that disrupted the supply chain and caused plants to be idled or shut down, inventory continued to remain tight.

Houston-based Group 1 Automotive, which owns and operates auto dealerships in the United States and UK, said gross margins for new vehicle retail sales rose to 6.7 percent from 5.7 percent, even though the new units sold fell 4 percent to 24,097.

Group 1 Automotive reported earnings of $1.06 per share versus analysts' expectation of 81 cents.

Group 1, the No. 4 U.S. auto dealer, said it generated higher revenue in all its business segments and maintained strong expense controls in a constrained vehicle sales market.

Competitor Asbury Automotive Group Inc <ABG.N>, which also reported higher-than-expected earnings, said used vehicle retail revenues and units rose 22 percent, while new car new vehicle revenues rose 5 percent.

"I think both Asbury and Group 1 Automotive beat profit estimates significantly. New vehicle sales came below our forecast but it was more than offset by margin expansion and SG&A leverage," analyst Rick Nelson of Stephens Inc said.

Asbury said so far, more used car sales, higher margins on new car sales and more financing and insurance business have offset the impact of supply chain disruption in Japan.

"Tight supply in new cars is driving consumers to the used car alternative and at same time dealers are emphasizing used cars because of the tight new car supply," analyst Nelson said.

However, Asbury said it has not yet felt the full impact of the supply chain disruption and expected the impact to be felt more in the third quarter.

Sonic Automotive Inc <SAH.N>, the No. 3 U.S. auto dealership group by vehicle sales, said the higher-margin segments of its business benefited as new and used vehicle business continued to gain market share.

Sonic reported earnings of 37 cents a share versus analyst estimates of 36 cents. It maintained its earnings from continuing operations forecast of $1.18-$1.28 per share.

Shares of Group 1 rose 14 percent to a year high of $48.29 on Tuesday morning, while Asbury shares rose 3.4 percent to $20.78. Sonic shares shed early gains and were down marginally in morning trade.

(Reporting by Megha Mandavia in Bangalore; Editing by Gopakumar Warrier)