UPDATE: Credit Suisse Reinstates Coverage on Group 1 Automotive with Neutral Rating, $70 PT on Upside Potential, Gross Margin Pressure

In a report published Wednesday, Credit Suisse analyst Gary Balter reinstated coverage on Group 1 Automotive GPI with a Neutral rating and $70.00 price target. In the report, Balter noted, “We are reinstating coverage of GPI with a Neutral rating and a $70 price target. We believe the upside potential from strong new vehicle sales may be offset by new vehicle gross margin pressure and below average expense leverage in the nearterm. The setup for GPI becomes more intriguing by the back half of 2013, in our view, as expense growth moderates, centralization initiatives drive savings, an appreciating Yen boosts J3 sales, and accretion from the UAB acquisition ramps up. We are establishing '13, '14 and '15 estimates of $5.05, $5.60 and $6.05, respectively. Our $70 price target reflects 12.5x our '14 estimate. We believe GPI is one of the best managed and best positioned public auto dealers. With a strong geographic and brand mix in the US, growing footprint in the UK and most recently, a sizeable platform in the 4th largest auto market in the world (Brazil), GPI has a solid backbone from which to grow. GPI's bottom line growth should also benefit from improving throughput and from the UAB acquisition as initial accretion estimates seem conservative. With the shares trading at less than 12x 2013 numbers, the stock screens well for longer-term investors.” Group 1 Automotive closed on Tuesday at $59.51.