Group 1's Second Quarter Is a Record, and Shares Look Undervalued to Us

Group 1 reported a record quarter, with second-quarter adjusted diluted earnings per share from continuing operations of $12.00 beating Refinitiv consensus of $10.83. The Brazil segment, which was sold July 1, added another $0.10. Same-store revenue fell 4.3% year over year (down 2.3% excluding foreign exchange), but total revenue rose 14.3% as the integration of the Prime acquisition and other 2021 deals is going faster than expected. We see Group 1’s stock as undervalued and think the company is very well set up to keep delivering strong results while also deploying cash for buybacks and acquisitions to keep growing; thus, we are not changing our fair value estimate. Group 1 has acquired net annual revenue of about $585 million in 2022, and we expect more deals this year.