After a volatile start to 2020, The Kerrigan Index out-performed the S&P and rose to all-time highs; all seven component companies hit record market capitalizations in 2020
INCLINE VILLAGE, Nev.–(BUSINESS WIRE)–Kerrigan Advisors, a leading sell-side advisory firm and thought leader to auto dealers in the U.S., has released The Kerrigan Index™ for December 2020/Year in Review. Comprised of the seven publicly-traded auto retailers, the report demonstrates how a resilient auto retail industry weathered the uncertainty of COVID-19 and emerged stronger than ever with record-breaking stock valuations, profitability and sales increases. In December, The Kerrigan Index™ increased 5.22%, outpacing the S&P’s increase of 3.71% for the month. For the year, The Kerrigan Index™ increased almost 30%, handily outperforming the broader US stock market and hitting all-time highs in 2020.
“What’s really notable is that the auto retail stocks, and The Kerrigan Index™, have traded at all-time highs throughout the final months of 2020. In spite of a historically crisis-driven and volatile year, the stocks are valued higher than ever before,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “Clearly, Wall Street is bullish on auto retail, and comfortable that it will continue to evolve on pace with technology and consumer behavior.”
December 2020: Retail Valuations Stay Resilient As Sales Trend Back to 2019 Levels
US auto sales were down approximately 5% year over year in December, with the monthly SAAR estimated at 16.4 million – compared to 17.1 million in December 2019. That continues a steady climb back to prior year levels after dropping to a low of 8.74 million in April, as dealers faced closures and struggled to source inventory. In December, six of the seven Kerrigan Index stocks posted increases in December, led by Asbury Automotive Group (+29.23%) and AutoNation (+13.87%).
“For all the talk of auto industry disruption – and with some of the disruptors being valued at crazy multiples – confidence in the traditional automotive retail model was profoundly reinforced in December,” said Ryan Kerrigan.
2020 Year in Review: Unanticipated Volatility, Outstanding Performance
The year 2020 was comprised of three distinct segments: a strong start to the year, a challenging downturn, and a subsequent rebound that brought the industry back to record-setting performance. After the wild ride, The Kerrigan Index™ increased 29.65%, significantly outperforming the S&P 500 Index which increased only 16.26%, and all seven component stocks posted increases for the year, led by Lithia Motors (+127.18%), and AutoNation (+41.34%).
“This was the ultimate comeback year, and auto dealerships were its comeback kids,” said Erin Kerrigan, Founder & Managing Director of Kerrigan Advisors. “In a year of raging unpredictability – from smooth sailing to collapsing financial markets, closed doors to critical inventory supply shortages – auto retail stayed resilient, and continued to prosper.”
From a low point on March 18th, when The Kerrigan Index dropped 51.8% from the start of the year, values began to rebound in the second quarter of 2020 and started to trade in all-time record territory in the third quarter. As reported in the Third Quarter 2020 Blue Sky Report® by Kerrigan Advisors, there was a 94% year-over-year rise in dealership earnings in the third quarter, driven by higher vehicle gross profit margins, increased operational efficiency, and price increases due to limited inventory.
“The rise in earnings helped to create an active buy/sell environment, with 186 transactions in the first nine months of 2020,” said Erin Kerrigan. “COVID-19 or not, that’s a 15.5% increase over the first nine months of 20191. Throughout the year, the market has rewarded retail competence, confidence, and proven retail processes.Despite being one of the toughest years in auto retail history, 2020 ultimately ended as the most profitable year on record for dealers.”
The Kerrigan Index™ Highlights
The December 2020/Year in Review Kerrigan Index provides a succinct overview of the auto retail industry as it moves beyond the volatility of this past year, and trends back to prior norms. The Kerrigan Index examines valuation trends of the seven public auto retailers, including CarMax, AutoNation, Penske Automotive Group, Lithia Motors, Group 1 Automotive, Asbury Automotive Group and Sonic Automotive, as well as reviews monthly performance data and retail sales trends.
Notable points include:
1 Source: The Banks Report, Automotive News, Kerrigan Advisors’ Research
Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 285 dealerships generating more than $9 billion in client proceeds, including two of the largest transactions in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group and Leith Automotive to Holman. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors is the only firm in auto retail exclusively dedicated to sell-side advisory, providing its clients the assurance of a conflict-free approach.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, the industry authority on dealership buy/sell market trends and valuations and includes Kerrigan Advisors’ signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases The Kerrigan Index™ comprised of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To access The Kerrigan Index™, click here. To read the 2024 Kerrigan Dealer Survey, click here. To read the 2024 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.
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