Analyst Raises Rating on Asbury Automotive on Cost Reduction Efforts

DETROIT - An analyst upgraded shares of Asbury Automotive Group Inc. saying that the dealership group is addressing its higher-than-industry operating costs, reported The Associated Press.

Deutsche Bank analyst Rod Lache raised his rating on the auto retailer to "Buy" from "Hold" on Tuesday after meeting with Asbury Automotive management.

The company is undergoing significant structural changes to reduce its costs, Lache wrote in a note to investors. Plus, it will be competing in a market with fewer dealerships due to reductions by Chrysler Group LLC and General Motors Co., and that should lead to higher sales for remaining dealers as the economy recovers next year and in 2011, Lache wrote.

"We believe that the company's structural cost reductions are more permanent than are currently perceived by the market," he said of Duluth, Ga.-based Asbury Automotive.

Although warranty and customer-paid service work should be down due to people putting off repairs during the bad economy, that will start to recover next year and in 2011 as the economy begins to improve, Lache said.

Reduced income from repairs should be partially offset by growth from dealer preparation, used vehicle reconditioning and wholesale parts sales, Lache wrote.