AutoNation Profits Up 36%

AutoNation Inc. (AN) witnessed a 36% increase in profits (adjusted) to $62 million or 38 cents per share in the second quarter of 2010 from $50 million or 28 cents per share in the prior-year quarter. With this, the automotive retailer has inched past the Zacks Consensus Estimate of 36 cents per share. The adjustments included debt-refinancing costs of $12 million after-tax, or 7 cents per share.
 
Revenues in the quarter escalated 19% to $3.1 billion, driven by a marked 25% improvement in the new and used vehicle revenues. It was close to the Zacks Consensus Estimate of $3 billion. Operating income increased to $125.9 million from $100.9 million a year ago.
 
New vehicle revenues rose 24% to $1.66 billion. This translated into revenue per vehicle of $31,956, an increase of 4% from the year ago level. The retailer’s new vehicle sales appreciated 20% to 51,893 units. The rise in unit sales was higher than the industry sales increase by 8 percentage points. The company continues to expect industry new vehicle sales of 11.5 million units for full year 2010.
 
Used vehicle (retail and wholesale) revenues went up 25% to $785 million. Used vehicle sales rose 19% to 40,551 units, transforming into per vehicle revenue of $17,378, an increase of 7%.

Revenues in the parts and services business grew a tad 3% to $548 million while that in the finance and insurance business rose 18% to $105 million.
 
Segment Performance
 
Revenues in the Domestic segment – comprising stores that sell vehicles manufactured by General Motors (MTLQQ), Ford (F) and Chrysler – advanced 25% to $1.04 billion, mainly driven by strong performance of Ford and Chevrolet lineups. Unit sales rose 30% to 16,569 vehicles. Segment operating income improved to $41.2 million from $24.3 million in the second quarter of 2009.
 
Revenues in the Import segment – comprising stores that sell vehicles manufactured primarily by Toyota (TM), Honda (HMC) and Nissan (NSANY) – went up 18% to $1.18 billion. Unit sales increased 16% to 26,944 vehicles. Segment operating income increased to $52.4 million from $41.5 million in the year ago quarter.
 
Revenues in the Premium Luxury segment – comprising stores that sell vehicles manufactured primarily by Daimler AG’s (DDAIF) Mercedes, and BMW and Lexus – gained 17% to $860 million. Unit sales rose 15% to 8,380 vehicles. Segment operating income rose to $48.5 million from $42.8 million in the second quarter of 2009.
 
Financials
 
AutoNation’s cash and cash equivalents declined to $101.6 million as of June 30, 2010, from $128.9 million as of June 30, 2009. In the first half of 2010, capital expenditures increased to $40.3 million from $34.1 million in the prior year.
 
During the quarter, AutoNation repurchased 20.9 million shares of its common stock for $414.4 million, reflecting an average purchase price of $19.83. On July 20, 2010, the board of directors of the company authorized the repurchase of up to an additional $250 million of its common stock. The company had 149.3 million shares outstanding as of June 30, 2010, down from 169.9 million as of June 30, 2009 .
 
AutoNation, a Zacks#3 Rank stock, is the largest automotive retailer in the U.S. and is about twice the size of its nearest competitor. It sells 33 different brands of new vehicles, the core brands being Ford, General Motors, Chrysler, Toyota, Nissan, Honda and BMW. These core brands represented 96% of the sales in 2009.
 
Based on its solid results, the company’s share price went up more than 1% to $22.30 on Thursday morning.

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