Back to top

Image: Bigstock

AutoNation (AN) Q2 Earnings Beat Estimates, Revenues Miss

Read MoreHide Full Article

AutoNation Inc. (AN - Free Report) reported record adjusted earnings of $1.08 per share in the second quarter of 2016, which increased from $1 earned in the second quarter of 2015. Moreover, adjusted earnings per share surpassed the Zacks Consensus Estimate of $1.05.
    

Autonation Inc. (AN - Free Report) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

 

Net income fell to $112 million from $115 million in second-quarter 2015. Operating income increased 2% to $226.5 million from $222.1 million a year ago.

AutoNation reported revenues of $5.44 billion, up 4.2% year over year. However, revenues fell short of the Zacks Consensus Estimate of $5.56 billion. The year-over-year improvement in the top line can be attributed to better performance across all the business sectors, including new vehicles, parts and service, used vehicles, and finance and insurance.

New vehicle revenues escalated 3.5% to $3.1 billion on a 0.5% rise in new vehicle unit sales to 85,654 vehicles. Revenues per vehicle retailed went up 3% to $35,864. On a same-store basis, new vehicle revenues dropped 1.7% to $2.86 billion.

Used vehicle (retail and wholesale) revenues increased 3.5% to $1.26 billion on a 1.2% and 27.6% revenue rise in the retail sector and the wholesale sector, respectively. Retail unit sales slipped 1.3% to 56,637 vehicles, while revenues per vehicle retailed rose 2.5% to $19,821. On a same-store basis, used vehicle revenues fell 1.4% to $1.17 billion.

Revenues at the parts and service business advanced 7.3% to $834.7 million in the reported quarter. Meanwhile, the finance and insurance business recorded a 3.5% increase in revenues to $225.4 million.

 

AUTONATION INC Price, Consensus and EPS Surprise

AUTONATION INC Price, Consensus and EPS Surprise | AUTONATION INC Quote

Segment Details

Revenues at the Domestic segment – comprising stores that sell vehicles manufactured by General Motors Co. (GM - Free Report) , Ford Motor Co. (F - Free Report) and others – increased 13.1% to $2 billion as retail new vehicle unit sales rose 10% to 30,654 vehicles. The segment’s income improved 0.8% to $85.6 million in the quarter under review.

Revenues at the Import segment – consisting of stores that sell vehicles manufactured primarily by Toyota Motor Corp. (TM - Free Report) and other Japanese automakers – dropped 2.6% to $1.75 billion owing to a 4.8% fall in retail new vehicle unit sales to 38,346 automobiles. Segment income at the segment decreased 6.9% to $74.6 million in the reported quarter.

Revenues at the Premium Luxury segment – consisting of stores that sell vehicles manufactured primarily by Mercedes, BMW and Lexus – inched up 0.7% to $1.64 billion. Retail new vehicle sales fell 2.6% to 16,654 luxury vehicles. The segment's income declined 1.6% to $92.9 million in the reported quarter.

Balance Sheet and Capex

AutoNation’s cash and cash equivalents fell to $54.7 million as of Jun 30, 2016, from $74.1 million as of Dec 31, 2015. The company’s inventory was valued at $3.66 billion as of Jun 30, 2016, compared with $3.61 billion as of Dec 31, 2015.

Non-vehicle debt increased to $2.71 billion from $2.36 billion as of Dec 31, 2015. Capital expenditures were $112.4 million in the first half of 2016 compared with $134.1 million in the prior-year period.

Share Repurchases

During the second quarter of 2016, AutoNation repurchased 1 million shares for $50 million. As of Jul 28, 2016, the company had approximately $116 million remaining under its share repurchase program and around 102 million shares outstanding.

Acquisitions

AutoNation continues to expand its business through acquisitions. In Jul 2016, the company completed the previously announced acquisition of four stores, including five franchises, in the Westchester County, NY area. These stores are expected to generate additional revenue of $190 million. AutoNation also announced that after completion of certain facilities associated with these stores, it will be awarded a Land Rover franchise and a Jaguar franchise. These franchises will generate annual revenue of $100 million when fully operational. The company also completed the acquisition of a Chrysler Jeep store in the Denver market in Jul 2016, which will generate annual revenue of $110 million.

Our Take

AutoNation currently carries a Zacks Rank #3 (Hold). In the reported quarter, the company benefited from its capital allocation strategy, including acquisitions and share repurchases. It is also focusing on managing the cost structure and reducing inventory levels. However, it faces challenges as a result of recalls by automakers due to faulty Takata airbags.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Published in