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AutoNation (AN) Beats on Q3 Earnings, Increases Buyback

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AutoNation Inc. (AN - Free Report) reported third-quarter 2021 adjusted earnings of $5.12 per share, skyrocketing 115% year over year and topping the Zacks Consensus Estimate of $4.35. This outperformance can be primarily attributed to the higher-than-expected profits from the new and used vehicle units.  Operational efficiency also aided the bottom line. The SG&A expenses as a percentage of gross profit were 56.9% for the quarter, marking a 750-basis point expansion from the corresponding period of 2020.
 
For the reported quarter, revenues amounted to $6,379.5 million, up 18% year over year. However, the top line missed the Zacks Consensus Estimate of $6,494 million.

AutoNation, Inc. Price, Consensus and EPS Surprise

AutoNation, Inc. Price, Consensus and EPS Surprise

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

Key Takeaways

For the reported quarter, new-vehicle revenues inched up 0.2% year over year to $2,753.8 million but lagged the Zacks Consensus Estimate of $3,221 million. Gross profit from the segment came in at $319.6 million, up from the $167.2 million reported in the prior-year quarter and beating the consensus mark of $288 million.

The used-vehicle revenues also rose 53.2% from the year-ago figure to $2,323.2 million, beating the consensus mark of $2,062 million. Gross profit from the segment came in at $177 million, up from the $146.9 million reported in prior-year quarter and marginally beating the consensus mark of $176 million.

Net revenues in the finance and insurance business amounted to $348.9 million, up from the $281.2 million recorded in the year-ago quarter, but marginally lagging the consensus mark of $350 million. Revenues from the parts and service business rose 10.7% from the prior-year period to $943.7 million.

AutoNation intends to open two additional AutoNation USA stores in the fourth quarter of 2021, including a store in Phoenix and entering a new market in Charlotte, NC. The company is also on track to open 12 new additional stores in 2022.

Segmental Details

Revenues in the Domestic segment were up 12.7% year over year to $1,995.2 million. The segment’s income jumped 33.2% year over year to $149.1 million for the September-end quarter. The segment comprises stores that sell vehicles manufactured by General Motors, Ford and Stellantis.

Revenues in the Import segment grew 22.3% from the prior-year quarter to $1,983.3 million. The segment’s income also climbed 62.5% year over year to $200.7 million for the reported quarter. The segment consists of outlets that sell vehicles manufactured primarily by Toyota, Honda, Subaru, Hyundai and Nissan.

The Premium Luxury segment comprises stores that sell retail vehicles manufactured by Mercedes-Benz, BMW, Lexus, Jaguar Land Rover and Audi. Sales in the segment rose 18.6% from the prior to $2,218 million. The segmental income also surged 43.2% year over year to $206.1 million for the reported quarter.

Financial Tidbits

AutoNation’s cash and cash equivalents were $72 million as of Sep 30, 2021. The company’s liquidity at year-end was $1.8 billion. The firm’s inventory was valued at $1,496.6 million. At the end of the third quarter, non-vehicle debt was $2,680.3 million. Capital expenditure for the quarter amounted to $47.5 million.

During the reported quarter, AutoNation bought back 7.9 million shares worth $879 million. The company increased the share-buyback authorization of up to an additional $1 billion. The company now has $1.3 billion remaining under the current share-repurchase authorization and 66 million shares outstanding.

In its third-quarter earnings release, AutoNation also announced the decision to acquire Priority 1 Automotive Group. The transaction is expected to close in the fourth quarter of 2021 and represents roughly $420 million in annual revenue.

AutoNation — which shares space with Lithia Motors (LAD - Free Report) , Group 1 Automotive (GPI - Free Report) and Penske Automotive Group, Inc. (PAG - Free Report) in the same industry — currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.