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A series of economic reports released recently seem to suggest that the economy is facing some trouble. Among these were lower factory orders and weak home sales data, as well as an increase in jobless claims. But disappointing retail data was what was particularly worrying for investors.

Retail Sales Fall

Retail sales declined 0.4% in January and December numbers were also revised downwards. An increase of 0.2% in December has now been changed to a 0.1% decline. This second monthly decline was primarily attributed to freezing temperatures in several regions of the U.S.

Core retail sales, which excludes building materials and food services, gasoline and automobiles, declined by 0.3%, after rising by the same amount in December. But some segments, such as building materials and garden equipment, experienced gains of 1.4%.

In fact, excluding automobiles, retails sales werely mostly unchanged. Sales at auto dealers fell 2.1%, leading the pack of decliners. Carmakers also blamed weak sales numbers on unusually frigid temperatures.

Strong 2013 Numbers

Auto sales exceeded analysts’ initial expectations for 2013, despite slipping somewhat in December. 15.6 million cars and trucks were sold in the U.S., the highest figure clocked since the 16.1 million recorded in 2007.

Detroit automakers contributed 7.4 million of the total numbers, with the Detroit Three performing particularly well. Ford Motor Co. (F - Analyst Report) topped the chart with a 10.8% increase over 2012. Analysts expect sales to slow down this year as pent-up demand declines.

However, profitability is expected to increase and Edmunds.com has even predicted an increase of 6% in 2014. Toyota Motor Corp. (TM - Analyst Report) believes U.S. auto sales will continue to recover, albeit slowly. As many emerging markets struggle, carmakers will increasingly focus on mature economies such as the U.S.

Below we present three auto retailers which stand to gain from the continuing recovery in car sales, each of which also has a good Zacks rank.

Asbury Automotive Group, Inc.

One of the leading auto retailers in the U.S., Asbury Automotive Group, Inc. (ABG - Snapshot Report) provides a range of automotive services and sells several auto products. Asbury had 99 franchises as of December 31, 2011. At the time, the company sold 30 foreign domestic and brands of vehicles.

Asbury Automotive Group holds a Zacks Rank #2 (Buy) and has expected earnings growth of 15.10%. The forward price-to-earnings ratios (P/E) for the current financial year (F1) is 12.34.

AutoNation Inc.

AutoNation Inc. (AN - Analyst Report) is an auto retailer which has three business segments: Import, Premium Luxury and Domestic. The company’s stores offers 32 different brands of vehicles. Of its 258 franchises as of December 31, 2011, 215 were located in the U.S. Most of these domestic locations were in the Sunbelt region.

Currently the company holds a Zacks Rank #2 (Buy) and has expected earnings growth of 11.90%. It has a P/E (F1) of 15.16.

Lithia Motors Inc.                                                      

Our third choice is Lithia Motors Inc. (LAD - Snapshot Report). The company sells cars and light trucks, both used and new, as well as auto parts. Additionally, it is involved in vehicle maintenance, repair, auto related financing and credit insurance. The company sold 25 new brands across 86 domestic stores as of February 24, 2012.

Besides a Zacks Rank #2 (Buy), Lithia Motors has expected earnings growth of 9.00%. It has a P/E (F1) of 13.08.

Even though recent data has been below par, the overall outlook for the economy remains upbeat. Fed Chair Janet Yellen has promised to keep interest rates at low levels, despite the proposed cuts in stimulus. This gives credence to the argument that the auto sector will continue to recover, making these stocks good additions to your portfolio.

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