What happened?

Shares of Asbury Automotive (NYSE:ABG), one of the largest automotive retailers in the U.S. with more than 83 dealerships spanning 29 domestic and foreign brands of vehicles, were surging 10% as of 10:45 a.m. EDT on Tuesday, after the company posted a strong third quarter.

So what

Asbury Automotive posted revenue of $1.76 billion during the third quarter, enough to top estimates and exceed the prior year's $1.6 billion. Adjusted earnings per share checked in at $2.21, topping analysts' estimates calling for $1.85, and much higher than the prior year's $1.48.

There were also a handful of other positive figures compared with the prior year. Same-store total revenue increased 6%, and gross profit increased 4%. Same-store new-vehicle revenue jumped 7%, and parts and service revenue increased 2%. Also, selling, general, and administrative expenses as a percentage of gross profit declined 220 basis points to 67.9%.

Multiple rows of cars at an automotive dealership.

Image source: Getty Images.

Now what

On a down day for the markets, Asbury's third-quarter results were strong enough to power its stock 10% higher. Investors were encouraged that the company could produce results in a stagnating U.S. new-vehicle sales market. Because of Asbury's size and diverse revenue streams -- including a parts and servicing segment that is stable during downturns and generated 12% of third-quarter revenue but an impressive 47% of gross profit -- it should produce solid results even as the U.S. automotive market plateaus. And this quarter gave investors a little more confidence in that ability.

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