What Asbury Automotive Group (ABG) Said on Its Q3 Earnings Call

Key Points

• Q3 adjusted EPS was $6.16 on $4.4 billion in revenue, though a $0.69-per-share non-cash Total Care Auto deferral reduced reported earnings; excluding it, EPS would have been $6.85.
• Asbury completed its Tekion dealership-platform rollout across all active stores. Early-adopting locations showed stronger customer-pay and fixed-operations results, with broader benefits expected to emerge in late Q1 and Q2 2027.
• Used-vehicle performance improved, but new-vehicle sales and fixed operations faced pressure, including a 76% year-over-year decline in EV sales. The company generated $336 million in year-to-date free cash flow and aims to reduce leverage below three times by mid-2027 before considering buybacks or acquisitions.

Asbury Automotive Group NYSE: ABG reported third-quarter 2026 adjusted earnings per share of $6.16, adjusted net income of $111 million and adjusted EBITDA of $218 million, as the auto retailer completed the rollout of its Tekion dealership-management platform across its active store base.

Revenue totaled $4.4 billion during the quarter, while gross profit was $732 million and gross margin was 16.6%. Adjusted operating margin was 4.9%. Chief Financial Officer Michael Welch said results included a $0.69-per-share non-cash headwind related to Total Care Auto, or TCA. Excluding that deferral impact, adjusted EPS would have been $6.85.

Tekion conversion completed

President and Chief Executive Officer Dan Clara said all active Asbury stores are now operating on Tekion, a single technology platform intended to improve operating efficiency, decision-making and customer service. The company converted 47 stores during the third quarter, its largest conversion quarter, and completed the final 10 dealership conversions in October.

Clara said the company expects benefits to build after employees gain familiarity with the platform, a process management said generally takes about six months. Stores in Georgia and the Koons group that have been on Tekion the longest provided early indications of potential gains. During the third quarter, those stores recorded 7% customer-pay gross-profit growth, compared with flat same-store customer-pay gross profit for the total company. Their total fixed-operations gross profit rose 5%, compared with a 2% decline for the overall same-store base.

Management also cited a 4% increase in units per salesperson and a 9% increase in gross profit per technician at the longer-tenured Tekion stores. Clara said roughly 35 to 40 stores had passed the six-month threshold by the end of the quarter. The company expects more significant benefits from the broader conversion to emerge near the end of the first quarter and into the second quarter of 2027.

Asbury’s same-store adjusted selling, general and administrative expense as a percentage of gross profit was 67% in the quarter, reflecting the peak period of platform conversions. Welch said the company expects some improvement in the fourth quarter and is targeting the low-60% range by the end of 2027, supported by both gross-profit growth and cost savings.

Vehicle sales and fixed operations

On an all-store basis, new-vehicle gross profit per retail unit was $2,949, down 6% sequentially. Clara said that level remains within the company’s expected range of roughly $2,750 to $3,000. Same-store new-vehicle unit sales declined 8% year over year, against a comparison that included the expiration of federal and state battery-electric-vehicle tax-credit eligibility in 2025.

Electric-vehicle sales accounted for 5 percentage points of the new-unit decline, according to the company. EV sales were down 76% year over year, and EVs represented 2.1% of third-quarter unit sales. Clara said pressure on new-vehicle gross profit per unit came primarily from import brands, including Hyundai, while Stellantis continued to be a headwind. Asbury ended the quarter with 53 days of new-vehicle inventory supply.

Used-vehicle operations improved during the quarter. Used retail gross profit increased 3% year over year, while used retail gross profit per vehicle rose 10% to $1,777. Used retail volume increased 4.5% sequentially on an all-store basis, and the company ended the quarter with a 41-day used-vehicle supply.

Clara said Asbury has shifted toward pursuing more used-vehicle volume while protecting profitability. He said approximately 70% to 75% of used vehicles retailed by the company come from trade-ins, customer acquisitions and loaner vehicles, while roughly 15% to 20% are acquired at auction. Management expects used-vehicle volume to increase year over year in the fourth quarter.

Parts and service results lagged management’s expectations. Customer-pay revenue increased 2% year over year, but customer-pay gross profit was flat and warranty gross profit declined 1%. Clara attributed some margin pressure to the disruption of adapting to the new dealership-management system, saying advisors may use discounts more frequently while learning new processes. Customer-pay repair-order traffic declined 1.9%, though management said it had not seen an increase in declined service work.

TCA, cash flow and capital allocation

Reported F&I gross profit per vehicle was $2,177, down $19 from the prior year. The decline was entirely attributed to the TCA-related non-cash deferral, which reduced the metric by $138. Excluding the deferral, F&I gross profit per vehicle was $2,453, up $119 year over year. TCA generated $5 million in pretax income, compared with $14 million a year earlier.

Asbury completed the TCA rollout to the Herb Chambers stores, meaning the product is now enabled across all company platforms. Welch said management is evaluating whether to retain TCA in its current form, expand it through channels outside Asbury dealerships, or separate it into an outside company. Management emphasized that it values the business for its cash flow and customer-experience benefits.

The company generated $525 million in adjusted operating cash flow year to date and $336 million in adjusted free cash flow through September. It ended the quarter with $1 billion in liquidity and a transaction-adjusted net leverage ratio of 3.5 times. Asbury’s priority is to reduce leverage below three times by mid-2027, Welch said. Once that target is met, the company plans to consider share repurchases and tuck-in acquisitions.

Clara also said an FTC administrative proceeding against the company was dismissed in early October. He said the outcome was consistent with Asbury’s view that its F&I sales practices comply with applicable regulations.

About Asbury Automotive Group (NYSE:ABG)

Asbury Automotive Group, Inc is a U.S.-based automotive retailer that operates franchised and independent dealerships. Its dealerships sell new and used vehicles from a range of domestic, import and luxury automobile brands, and provide related services throughout the vehicle ownership cycle.

The company's operations include automotive repair and maintenance, parts and accessories, collision repair, vehicle financing and insurance products, and other dealership services. Asbury also supports vehicle sales and service through digital retailing and online customer tools.

Founded in 1995, Asbury has expanded through acquisitions and serves customers across multiple markets in the United States.

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