Group 1 Earnings: Company Overcomes Vendor Cyberattack and Summer Storms for a Strong Quarter

Group 1 reported a good second quarter despite $22.9 million in pretax income damage from the June 19 CDK dealer management system cyberattack. We are raising our fair value estimate to $312 from $299 on the time value of money and more revenue growth than previously modeled considering how 2024 sales are tracking. CDK restored core services to Group 1 just a week later, and Group 1 mitigated the damage via its consolidated back office and Acceleride digital shopping platform, enabling deals to be structured during that week. The cyberattack on Group 1’s DMS provider in the US caused lost business income of about $17 million ($0.97 EPS) plus a $5.9 million ($0.34 EPS) disaster pay special item charge to compensate salespeople and service technicians for lost business as well as to retain them. We expect most lost vehicle sales volume can be made up in the third quarter, but roughly $25 million of lost service revenue will likely not be made up as those vehicles were likely serviced elsewhere. Adjusted diluted EPS from continuing operations of $9.80 beat the $9.36 LSEG consensus but fell 16.4% year over year as profits continue to come down for dealers after the chip shortage-induced high levels of the past few years.