BofA raises price targets for multiple auto dealers; Penske preferred ahead of 2Q results

Overview

This report is Bank of America's preview of 2Q26 results for the automotive dealer sector. The core conclusion is that industry demand is not uniformly strong, but dealer earnings resilience is better than headline volume figures suggest: relatively stable new- and used-vehicle GPUs, improving SG&A leverage, accelerating U.K. markets, and buybacks at certain companies support EPS; meanwhile, difficult P&S comparisons, tight used-vehicle supply, and 3Q year-over-year pressure from last year's EV pull-forward remain the main constraints.

Core views

BofA believes dealer earnings revisions for 2Q are modestly positive overall, but differences between companies are significant. PAG is the preferred pick, benefiting from improving U.K. markets, a second-half recovery in commercial trucks, and a relatively favorable new-vehicle comparison; 2Q EPS estimates for SAH and AN were raised, driven by new-vehicle GPUs and SG&A improvement, respectively; 2Q EPS estimates for LAD and GPI were reduced, mainly due to weaker volume and P&S expectations; ABG was unchanged but weighed down by the Tekion conversion; OPLN is supported by expiring off-lease contracts, digital migration, and increased dealer-to-dealer share.

Analysis framework

The report centers on 2Q26 EPS revisions and adjusts forecasts and price targets for ABG, AN, GPI, LAD, PAG, SAH, and OPLN based on same-store new- and used-vehicle volume, GPU, P&S revenue, SG&A as a percentage of gross profit, regional demand, brand mix, the U.K. market, commercial truck orders, and off-lease supply. For valuation, dealers are primarily valued using 2027 EPS P/E multiples, while OPLN is valued using a 2027 adjusted EV/EBITDA multiple.

Methodology notes

• Earnings forecast revisions2Q26 EPS revision

  Pre-earnings forecast adjustments

  Updates each company's 2Q26 and 2026 EPS estimates by adjusting same-store volume, GPU, P&S, SG&A, and buyback assumptions.

• Operating metrics analysissame-store sales and GPU framework

  Same-store volume and gross profit per vehicle

  Same-store new- and used-vehicle volume measures demand and market share, while GPU measures per-vehicle profitability; the report believes volume is under pressure but most GPUs remain relatively stable.

• Valuation methodologyP/E and EV/EBITDA valuation

  Price-target multiple valuation

  ABG, AN, GPI, LAD, PAG, and SAH are primarily valued using 2027 EPS P/E multiples; OPLN is valued using a 2027 adjusted EV/EBITDA multiple.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• PAG

  Preferred pick ahead of results

  Strengths

  Easier new-vehicle year-over-year comparison, improving U.K. trends, relatively stable P&S, and potential acceleration in commercial trucks in the second half.

  Weaknesses

  P&S continues to face difficult warranty comparisons, reduced recall benefits, and pressure from fewer working days.

  Comparison

  The report expects PAG to outperform peers on 2Q same-store new-vehicle volume.

  Risks

  Declining U.S. sales, weaker European conditions, rising interest rates, adverse foreign-exchange movements, and Roger Penske leadership risk.

• LAD

  Price target raised but 2Q EPS reduced

  Strengths

  Strong value-auto capabilities, used-vehicle GPU above peers, and approximately $300mm in FY26 buybacks expected.

  Weaknesses

  New- and used-vehicle volume is affected by last year's high base, while SG&A improvement is weaker than previously expected.

  Comparison

  LAD has historically outperformed peers in used-vehicle GPU.

  Risks

  Declining U.S. sales, slow improvement in operating leverage, domestic-brand share losses, rising interest rates, consumer dissatisfaction, and regulatory changes.

• SAH

  Price target and 2Q EPS both raised

  Strengths

  New-vehicle GPU is expected to approach the high end of the $2.7k-$3.0k guidance range, while its luxury-brand mix should cushion year-over-year U.S. pressure.

  Weaknesses

  2H26 P&S growth expectations were reduced slightly.

  Comparison

  Sonic's luxury-brand weighting provides relative defensiveness in new-vehicle mix.

  Risks

  U.S. cyclical downturn, slower P&S growth, rising interest rates, and regulatory changes.

• OPLN

  Price target raised; Neutral rating

  Strengths

  Recovery in expiring off-lease contracts, transaction digitalization, increased dealer-to-dealer share, and recovery in commercial business.

  Weaknesses

  Commercial volume growth may decline from the mid-to-high 20% range in 1Q, while the pace of payoff declines is affected by used-vehicle prices.

  Comparison

  Compared with traditional dealers, OPLN benefits more from rising online penetration in wholesale used vehicles.

  Risks

  Slower recovery in wholesale vehicle supply, failure to maintain key customer relationships, and loss of key management personnel.

• GPI

  2Q EPS reduced

  Strengths

  Toyota/Lexus exposure, stable GPU, approximately $8mm of 2Q cost-reduction benefits, and historically better same-store metrics than peers.

  Weaknesses

  Soft demand in Texas, tight used-vehicle supply, difficult P&S comparisons, and fewer collision locations.

  Comparison

  Since 2023, GPI has outperformed publicly traded peers on several same-store sales metrics.

  Risks

  U.S. or U.K. demand weaker than expected, management turnover, operating leverage below expectations, rising interest rates, and regulatory changes.

• ABG

  2Q EPS unchanged but outlook cautious

  Strengths

  Toyota/Lexus exposure and SG&A as a percentage of gross profit historically better than peers.

  Weaknesses

  The Tekion conversion is creating near-term P&S pressure, and stores require 4-6 months after conversion to return to normal.

  Comparison

  The report expects ABG may lag broader peers in same-store new-vehicle volume.

  Risks

  Declining U.S. sales, Japanese-brand share losses, rising interest rates, consumer dissatisfaction, and regulatory changes.

• AN

  2Q EPS raised

  Strengths

  Improving SG&A, strong buybacks, approximately $300mm repurchased in 1Q and nearly $100mm in April.

  Weaknesses

  Luxury and premium brand mix, a high April base, and weakness in Washington and Texas weigh on new-vehicle volume.

  Comparison

  AN's current NTM P/E is below its historical average since 2011.

  Risks

  Declining U.S. sales, costs performing below expectations, suspension of buybacks, rising interest rates, consumer dissatisfaction, and regulatory changes.

Key data

• 2Q dealer EPS revisionsRaised approximately 0.3% on averageThe report says 2Q EPS estimates were revised modestly upward on average.
• Same-store new-vehicle volume outlookAverage year-over-year change of -2.3%Broadly maintained from prior estimates, below Wards industry retail growth of 0.8%.
• Same-store used-vehicle volume outlookAverage year-over-year change of -2.3%Low-mileage, high-quality used-vehicle supply remains tight; off-lease supply is expected to improve in 3Q/4Q.
• U.K. 2Q new-vehicle volume+14.7%Accelerated from +5.9% in 1Q, benefiting PAG, LAD, and GPI.
• 3Q same-store new-vehicle outlookBroadly flat on averageSAAR remains resilient, but the high base created by last year's EV pull-forward must be absorbed.
• PAG 2Q EPS estimateReduced approximately 1% to $3.46P&S and SG&A pressure offset better new- and used-vehicle momentum.
• AN 2Q EPS estimateRaised approximately 7% to $5.42A better SG&A trajectory offset new-vehicle volume and P&S pressure.
• LAD 2Q EPS estimateReduced approximately 7% to $8.50Softer new- and used-vehicle volume and weaker-than-expected SG&A leverage.
• SAH 2Q EPS estimateRaised 3% to $1.72New-vehicle GPU was raised to the high end of the company's $2.7k-$3.0k guidance.
• OPLN 2Q EPS estimateRaised approximately 3%Growth in commercial and dealer-to-dealer transaction volume is supported by off-lease activity, digitalization, and share gains.

Impact & implications

For investors, the report's core message is that the auto dealer sector is not simply a cyclical recovery trade, but rather a trade centered on earnings quality and company-specific structural differences. PAG's international exposure, commercial truck recovery, and P&S stability make it relatively more attractive; near-term earnings revisions for AN and SAH are positive; LAD and GPI retain long-term advantages but face 2Q pressure from volume and operating leverage; ABG's Tekion transition may create a short-term drag; OPLN is more of a medium-term beneficiary of digitalization in wholesale used vehicles and recovering off-lease supply.

Risks

• A material downturn in U.S. auto sales.
• Interest rates remaining high or rising further, suppressing vehicle demand and increasing repossession risk.
• P&S pressure from difficult warranty/collision comparisons, reduced recall benefits, and fewer working days.
• Used-vehicle supply recovering more slowly than expected, especially insufficient low-mileage, high-quality inventory.
• A high 3Q year-over-year comparison caused by last year's EV pull-forward.
• The Tekion system conversion may continue to weigh on ABG store efficiency and P&S.
• Weaker European or U.K. demand and adverse foreign-exchange movements may affect PAG, LAD, and GPI.
• Uncertainty from changes in automotive retail franchise laws, consumer finance regulations, or customer satisfaction.

What to watch

• PAG commercial truck orders and the strength of the 2H recovery.
• Whether 3Q/4Q off-lease supply recovery improves used-vehicle volume and OPLN commercial volume.
• Whether P&S growth can stabilize again after difficult comparisons.
• Whether new- and used-vehicle GPUs remain stable or normalize lower as volume recovers.
• The pace of store recovery during the 4-6 months following ABG's Tekion conversion.
• Support for EPS from the pace of buybacks at companies such as AN and LAD.
• Whether improvement in U.K. new-vehicle volume continues.
• The pressure from last year's EV pull-forward and its high base on 3Q year-over-year volume.