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AutoNation (AN) Q3 Earnings: Stock to Beat Estimates Again?
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AutoNation, Inc. (AN - Free Report) is set to release third-quarter 2016 results before the market opens on Oct 28. Last quarter, the company posted a positive earnings surprise of 2.86%. Let’s see how things have shaped up for the forthcoming announcement.
Why a Likely Positive Surprise?
Our proven model shows that AutoNation is likely to beat earnings because it has the right combination of the two key ingredients.
Zacks ESP: AutoNation currently has an Earnings ESP of +0.88%. This is because the Most Accurate estimate of $1.15 stands above the Zacks Consensus Estimate of $1.14. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: AutoNation carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of AutoNation’s Zacks Rank #3 and positive ESP makes us reasonably confident of an earnings beat.
Factors Influencing this Quarter
AutoNation is positioned to benefit from the recovery in the auto market, backed by its optimal brand and market mix as well as a disciplined cost structure. Rising average age of cars and trucks in the U.S., a robust consumer credit environment, and an increase in new product offerings from automotive manufacturers are building a strong sales environment.
In addition, the company is poised to benefit from the expansion of its business through acquisitions. From January through early Jul 2016, AutoNation had already acquired 18 new stores that are expected to generate annual revenue of $1.1 billion. Moreover, the company is focused on providing shareholder returns through share buybacks.
However, AutoNation operates in a highly competitive industry. The company competes on the basis of location, service, price, selection, and online and mobile offerings. Also, its performance is dependent on automakers. Any fluctuation in supply can adversely affect the company’s results. Additionally, its deteriorating financial position poses a concern. Its cash and cash equivalents fell to $54.7 million as of Jun 30, 2016, from $74.1 million as of Dec 31, 2015, while non-vehicle debt increased to $2.71 billion as of Jun 30, 2016 from $2.36 billion as of Dec 31, 2015.
Here are some companies you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat this quarter:
Magna International Inc. (MGA - Free Report) has an Earnings ESP of +1.67% and a Zacks Rank #2. The company’s third-quarter 2016 financial results are expected to release on Nov 3.
Visteon Corporation (VC - Free Report) has an Earnings ESP of +9.46% and a Zacks Rank #3. The company’s third-quarter 2016 results are expected to release on Oct 27.
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AutoNation (AN) Q3 Earnings: Stock to Beat Estimates Again?
AutoNation, Inc. (AN - Free Report) is set to release third-quarter 2016 results before the market opens on Oct 28. Last quarter, the company posted a positive earnings surprise of 2.86%. Let’s see how things have shaped up for the forthcoming announcement.
Why a Likely Positive Surprise?
Our proven model shows that AutoNation is likely to beat earnings because it has the right combination of the two key ingredients.
Zacks ESP: AutoNation currently has an Earnings ESP of +0.88%. This is because the Most Accurate estimate of $1.15 stands above the Zacks Consensus Estimate of $1.14. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: AutoNation carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of AutoNation’s Zacks Rank #3 and positive ESP makes us reasonably confident of an earnings beat.
Factors Influencing this Quarter
AutoNation is positioned to benefit from the recovery in the auto market, backed by its optimal brand and market mix as well as a disciplined cost structure. Rising average age of cars and trucks in the U.S., a robust consumer credit environment, and an increase in new product offerings from automotive manufacturers are building a strong sales environment.
In addition, the company is poised to benefit from the expansion of its business through acquisitions. From January through early Jul 2016, AutoNation had already acquired 18 new stores that are expected to generate annual revenue of $1.1 billion. Moreover, the company is focused on providing shareholder returns through share buybacks.
However, AutoNation operates in a highly competitive industry. The company competes on the basis of location, service, price, selection, and online and mobile offerings. Also, its performance is dependent on automakers. Any fluctuation in supply can adversely affect the company’s results. Additionally, its deteriorating financial position poses a concern. Its cash and cash equivalents fell to $54.7 million as of Jun 30, 2016, from $74.1 million as of Dec 31, 2015, while non-vehicle debt increased to $2.71 billion as of Jun 30, 2016 from $2.36 billion as of Dec 31, 2015.
AUTONATION INC Price and EPS Surprise
AUTONATION INC Price and EPS Surprise | AUTONATION INC Quote
Stocks to Consider
Here are some companies you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat this quarter:
Fox Factory Holding Corp (FOXF - Free Report) , expected to report third-quarter 2016 financial results on Nov 2, has an Earnings ESP of +2.56% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Magna International Inc. (MGA - Free Report) has an Earnings ESP of +1.67% and a Zacks Rank #2. The company’s third-quarter 2016 financial results are expected to release on Nov 3.
Visteon Corporation (VC - Free Report) has an Earnings ESP of +9.46% and a Zacks Rank #3. The company’s third-quarter 2016 results are expected to release on Oct 27.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>