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.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.