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AutoNation (AN) Up 14.8% Since Earnings Report: Can It Continue?

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More than a month has gone by since the last earnings report for AutoNation, Inc. (AN - Free Report) . Shares have added about 14.8% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AutoNation's Q2 Earnings & Revenues Miss, Down Y/ Y

AutoNation reported earnings of 86 cents per share in second-quarter 2017, which decreased from $1.08 in the second quarter of 2016. Earnings also missed the Zacks Consensus Estimate of 98 cents.

Net income from continuing operations declined to $88 million from $112 million in second-quarter 2016.

During the quarter, AutoNation reported revenues of $5.28 billion, declining 3% year over year. Also, revenues missed the Zacks Consensus Estimate of $5.57 billion.

New vehicle revenues decreased to $2.93 billion in second-quarter 2017. Used vehicle revenues also declined 4.6% year over year to $1.2 billion. Revenues at the parts and service business advanced 2.7% to $857.5 million in the reported quarter. The finance and insurance business also registered a 1.5% increase in revenues to $228.8 million.

Along with the earnings release, AutoNation announced the acquisition of Alpine Jaguar in Ft. Lauderdale, FL. This represents around $68 million in annual revenue. It also marks the company’s first Jaguar franchise in South Florida market.

Segment Details

Revenues at the Domestic segment — comprising stores that sell vehicles manufactured by General Motors Co., Ford Motor Co. and others — declined 7.5%. The segment’s income fell 29.8% to $60.1 million in the quarter under review.

Revenues at the Import segment — comprising stores that sell vehicles manufactured primarily by Toyota Motor Corp. and other automakers —dipped 2.6% to $1.7 billion. However, segment income rose 0.9% to $75.3 million in the reported quarter.

Revenues at the Premium Luxury segment — consisting of stores that sell vehicles manufactured primarily by Mercedes, BMW and Lexus — remained almost flat at $1.64 billion. The segment’s income declined 9.7% to $83.9 million in the reported quarter.

Balance Sheet and Capex

AutoNation’s cash and cash equivalents were $52.5 million as of Jun 30, 2017, down from $54.7 million as of Jun 30, 2016. The company’s inventory was valued at $3.71 billion as of Jun 30, 2017 compared with $3.66 billion as of Jun 30, 2016.

Non-vehicle debt decreased to $2.57 billion from $2.71 billion as of Jun 30, 2016. Capital expenditures were $82 million in second-quarter 2017 compared with $61.7 million in the prior-year period.

Share Repurchases

In second-quarter 2017, the company repurchased 0.9 million shares for $34.9 million. As of Jul 31, 2017, AutoNation had approximately $264 million remaining under its share repurchase program and around 100 million shares outstanding.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

AutoNation, Inc. Price and Consensus

 

AutoNation, Inc. Price and Consensus | AutoNation, Inc. Quote

VGM Scores

At this time, the stock has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.




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