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AutoNation Inc. (AN - Analyst Report) posted a 21.4% rise in earnings per share to 68 cents in the first quarter of 2013 from 56 cents in the same quarter of 2012, topping the Zacks Consensus Estimate by 5 cents.
 
Net income improved 13.2% to $83.2 million from $73.5 million in the first quarter of 2012. Operating income increased 13.9% to $169.4 million from $148.7 million a year ago. However, operating margin remained flat at 4.1% on a year-over-year basis.

Revenues increased 10.8% to $4.1 billion, nearly tallying the Zacks Consensus Estimate of $4.0 billion. The revenue growth was mainly attributable to strong new vehicle sales during the quarter. Segment-wise, the company’s Premium Luxury was the biggest gainer in the said quarter.

New vehicle revenues escalated 13.2% to $2.3 billion while new vehicle unit sales grew 9.2% to 67,159 vehicles translating into a 3.7% hike in revenues per vehicle to $33,617. On same-store basis, new vehicle revenues increased 9.7% to $2.2 billion.

Used vehicle (retail and wholesale) revenues increased 9.9% to $1.0 billion while unit sales zoomed 9.5% to 50,505 vehicles, reflecting a 2.5% rise in revenues per vehicle to $17,804. On same-store basis, used vehicle revenues increased 6.1% to $975.2 million.

Revenues in the Parts and service business grew 6.1% to $636.6 million in the quarter. Meanwhile, Finance and insurance business recorded a 19.5% increase in revenues to $155.6 million.

Segment Details

Revenues in the Domestic segment – comprising stores that sell vehicles manufactured by General Motors (GM - Analyst Report), Ford Motor (F - Analyst Report) and Chrysler – increased 12.1% to $1.4 billion as unit sales rose 9.9% to 22,544 vehicles. Segment operating income improved 17.9% to $58.6 million in the first quarter of 2013.

Revenues in the Import segment – comprising stores that sell vehicles manufactured primarily by Toyota Motor (TM - Analyst Report) and other Japanese automakers – hiked 10.0% to $1.5 billion on a 6.4% rise in unit sales to 33,032 automobiles. Segment operating income escalated 14.7% to $71.0 million in the quarter.

Revenues in the Premium Luxury segment – comprising stores that sell vehicles manufactured primarily by Mercedes, BMW and Lexus – advanced 14.7% to $1.2 billion. Unit sales spiked 16.2% to 11,583 vehicles. Segment operating income grew 17.0% to $68.8 million in the quarter.

Share Repurchases

During the quarter, AutoNation repurchased 0.1 million shares for $2.2 million compared with 11.7 million shares for $405.4 million in the first quarter of 2012. The company had 121.3 million shares outstanding as of Mar 31, 2013.

Balance Sheet and Capex

AutoNation’s cash and cash equivalents declined to $46.3 million as of Mar 31, 2013 from $76.3 million as of Mar 31, 2012. The company’s inventory was valued at $2.5 billion as of Mar 31, 2013 versus $2.0 billion as of Mar 31, 2012. Non-vehicle debt increased to $2.0 billion from $1.9 billion as of Mar 31, 2012. Capital expenditures decreased to $23.1 million in the first quarter of 2013 from $29.1 million in the 2012-quarter.

Acquisitions

During the quarter, AutoNation has entered agreements to acquire three notable stores. They include SanTan Honda Superstore and Hyundai of Tempe in Phoenix, and Don Davis Toyota Scion in Dallas, together with annual revenues of $250 million. All these stores reatailed nearly 8,300 new and used vehicles in 2012.

Guidance

AutoNation revealed that it is on track to complete its coast-to-coast rebranding. As of Mar 31, 2013, about 30% of its Domestic and Import vehicles were sold under the rebranded AutoNation name. The company reitrated its industry new vehicle sales guidance of mid-15 million units for 2013.

Our Take

AutoNation is the largest automotive retailer in the U.S. with headquartered in Fort Lauderdale, FL. As of Mar 31, 2013, the company owned and operated 262 new vehicle franchises that sell 32 brands located in the major metropolitan markets in 15 states. Currently, the company retains a Zacks Rank #3, which implies a Hold rating for the short-term (one to three months).

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