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What's in the Offing for AutoNation's (AN) Q3 Earnings?

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AutoNation, Inc. (AN - Free Report) is slated to release third-quarter 2020 results on Oct 21, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.56 on revenues of $5.27 billion.

AutoNation, the largest automotive retailer in the United States, delivered better-than-expected results in the last reported quarter on higher-than-expected revenues from new and used vehicles.

Over the trailing four quarters, the company surpassed estimates on all occasions, the average surprise being 85.47%. This is depicted in the graph below:

 

AutoNation, Inc. Price and EPS Surprise

AutoNation, Inc. Price and EPS Surprise

AutoNation, Inc. price-eps-surprise | AutoNation, Inc. Quote


Investors project an earnings beat for AutoNation this time as well. Reassuringly, our model also indicates the same.

Trend in Estimate Revision

The Zacks Consensus Estimate for AutoNation’s third-quarter earnings per share has been revised upward by 4 cents in the past seven days. Moreover, it compares favorably with the year-ago quarter’s earnings of $1.18 per share. However, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year decline of 3.5%.

Earnings Whispers

Our proven model predicts an earnings beat for AutoNation this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This has been elaborated below.

Earnings ESP: AutoNation has an Earnings ESP of +19.23%. This is because the Most Accurate Estimate is pegged 30 cents higher than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AutoNation currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors to Note

AutoNation’s focus on the used vehicle market is likely to have boosted the company’s earnings in the quarter to be reported. Amid the economic slowdown, expensive new vehicles triggered solid demand for cheaply-available used vehicles. In the last reported quarter, the company announced its decision to open 20 additional stores in the United States over the next three years to capture a bigger share in the larger, cyclically less volatile used retail market. This is anticipated to have buoyed the company’s top line. The Zacks Consensus Estimate for revenues from the used-vehicles segment in the third quarter is pinned at $1,430 million, higher than the $1,325 million recorded in the previous quarter and $1,403 reported in the year-ago quarter.

With the economy gradually recovering, the demand for new vehicles is also likely to have improved in the September-end quarter. This is expected to have inflated the company’s revenues generated from the new vehicle segment, which usually makes the highest contribution to total revenues. The Zacks Consensus Estimate for sales of new vehicles for the period in discussion is pegged at $2,620 million, up from the prior quarter’s $2,261 million. Further, the consensus estimate for quarterly revenues from the parts and services segment is pinned at $865 million, indicating a rise from the $690 million recorded in the June-end quarter.

AutoNation’s heightened focus on ramping up its digital capabilities in response to the evolving buying behaviors of consumers amid the pandemic is anticipated to have buoyed sales during the quarter to be reported. Apart from this, the auto retailer’s cost-containment efforts in the wake of the pandemic are likely to have aided the margins during the July-September period.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Group 1 Automotive, Inc. (GPI - Free Report) has an Earnings ESP of +21.54% and currently flaunts a Zacks Rank #1, at present. It is scheduled to report earnings results on Oct 29.

Gentex Corporation (GNTX - Free Report) has an Earnings ESP of +8.37% and carries a Zacks Rank of 2 currently. The company is set to announce quarterly figures on Oct 23.

Cooper Tire Rubber Company (CTB - Free Report) has an Earnings ESP of +19.84% and currently holds a Zacks Rank #2. The company is slated to release quarterly numbers on Oct 29.

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