Asbury Earnings: CDK Cyberattack Proves Costly, but We See No Long-Term Damage

Asbury’s second-quarter adjusted diluted EPS of $6.40 fell short of the $7.33 LSEG consensus and sent the stock down 10.7% on Aug. 2. Adjusted results include management’s estimate of a $0.95 to $1.15 EPS hit from the cyberattack on dealer management system vendor CDK that started June 19. Asbury uses CDK at all its stores except for the Jim Koons stores acquired in December, which make up about 13% of Asbury’s store count. Once service was fully restored on July 8, employees needed 12 days to enter transactions since June 19 into the accounting system. The service segment alone had 100,000 repair orders to enter. CEO David Hult said on the call that most of the lost business will not be made up in subsequent quarters because it was either lost service business or customers did not want to wait to buy a vehicle. Asbury may receive insurance recoveries, but the timing and amount of that is uncertain. We are lowering our fair value estimate to $295 from $300 after reducing revenue over our five-year explicit forecast period by 3.2%. This change is to adjust projections for how 2024 is trending.