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Here's Why You Should Retain AutoNation Stock in Your Portfolio
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Key Takeaways
AutoNation's record Parts & Service profits and growing finance earnings provide recurring growth drivers.
AN is investing in digital capabilities while repurchasing shares to support per-share earnings.
High debt, weaker new-vehicle profitability and elevated SG&A remain key challenges.
AutoNation (AN - Free Report) is set to gain from record aftersales profits, expanding finance earnings, digital investments and share repurchases. However, high debt limits financial flexibility, while weaker new-vehicle profitability and elevated operating costs remain concerns.
Let’s dig deeper and see why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio.
Aftersales Contribution & Investment in Technology Aid AN
Aftersales remains AutoNation’s largest gross profit contributor and provides a recurring earnings stream across vehicle cycles. In the second quarter of 2026, Parts & Service gross profit reached a record $607 million, up 1% year over year, while customer-pay gross profit rose 7% in total and 4% on a same-store basis. Same-store franchise technician headcount rose more than 2%, and the company expects technician capacity and customer retention to be key to sustaining mid-single-digit aftersales gross profit growth over time.
AutoNation Finance continues to expand its earnings contribution as the loan portfolio scales and external funding increases. In second-quarter 2026, originations were $485 million, and the portfolio reached $2.67 billion, up about 52% year over year. Quarterly profit rose to $11 million from $2 million, while first-half profit reached $20 million versus $2 million a year earlier. Finance penetration was 11% of total vehicle sales and 18% of financed sales.
AutoNation continues to invest in digital and omni-channel capabilities as customers increasingly use online resources for vehicle research and purchasing. AutoNation Express supports online buying and selling, while its minority investment in TrueCar broadens digital reach. AN is also adding functionality across research, purchase and vehicle-fulfillment channels to match changing customer preferences. These investments complement store execution, and second-quarter 2026 market share remained consistent with the first quarter in the markets AutoNation serves.
AutoNation continues to deploy capital toward share repurchases, which remains an important lever for per-share earnings and boosts shareholder confidence. From Jan. 1 to July 29, 2026, AutoNation repurchased 2.3 million shares. As of June 30, 2026, $618.9 million remained authorized under the current program.
High Debt & Operating Cost Ail AutoNation
AutoNation’s balance sheet remains leveraged as capital deployment expands. As of June 30, 2026, non-vehicle debt was $4.4 billion, cash was $53 million and liquidity was about $1 billion. The firm’s long-term debt-to-capital ratio stands at 0.72 compared to the industry’s 0.27. High debt restricts the firm’s financial flexibility.
New-vehicle economics remain exposed to vehicle costs, manufacturer incentives and changes in powertrain mix even as sequential profitability has stabilized. In second-quarter 2026, new-vehicle gross profit per unit was $2,381, down 15% from $2,785 a year earlier, while new units fell 4%. The decline reflected higher average vehicle costs and lower manufacturer incentives, with BEV sales down more than 30% year over year. Premium Luxury new units fell 4%, while Domestic units declined 12%. The company expects prior-year tariff and EV-credit comparison effects to ease in the second half, but sustaining margins still depends on vehicle costs and mix.
Operating efficiency remains below the company’s long-term target despite sequential progress. Adjusted SG&A was 68.2% of gross profit in the second quarter of 2026, up from the 66% to 67% target range and 66.2% a year earlier. Advertising costs rose to support vehicle sales, while first-half spending also reflected customer experience investments and higher self-insured losses.
Price Performance, Valuation and Estimates
AN has underperformed the Zacks Automotive - Domestic industry in the last six months. Its shares have gained 1.8% compared to the industry’s growth of 14.3%.
Image Source: Zacks Investment Research
From a valuation perspective, AN appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.23, lower than the industry’s 0.3.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AN’s 2026 EPS has improved 28 cents in the past 30 days.
The Zacks Consensus Estimate for CYD’s 2026 sales and earnings implies year-over-year growth of 58.6% and 68.6%, respectively.
The Zacks Consensus Estimate for GTX’s 2026 sales and earnings implies year-over-year growth of 7.2% and 25.7%, respectively. The EPS estimate for 2026 and 2027 has improved 10 cents each over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Here's Why You Should Retain AutoNation Stock in Your Portfolio
Key Takeaways
AutoNation (AN - Free Report) is set to gain from record aftersales profits, expanding finance earnings, digital investments and share repurchases. However, high debt limits financial flexibility, while weaker new-vehicle profitability and elevated operating costs remain concerns.
Let’s dig deeper and see why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio.
Aftersales Contribution & Investment in Technology Aid AN
Aftersales remains AutoNation’s largest gross profit contributor and provides a recurring earnings stream across vehicle cycles. In the second quarter of 2026, Parts & Service gross profit reached a record $607 million, up 1% year over year, while customer-pay gross profit rose 7% in total and 4% on a same-store basis. Same-store franchise technician headcount rose more than 2%, and the company expects technician capacity and customer retention to be key to sustaining mid-single-digit aftersales gross profit growth over time.
AutoNation Finance continues to expand its earnings contribution as the loan portfolio scales and external funding increases. In second-quarter 2026, originations were $485 million, and the portfolio reached $2.67 billion, up about 52% year over year. Quarterly profit rose to $11 million from $2 million, while first-half profit reached $20 million versus $2 million a year earlier. Finance penetration was 11% of total vehicle sales and 18% of financed sales.
AutoNation continues to invest in digital and omni-channel capabilities as customers increasingly use online resources for vehicle research and purchasing. AutoNation Express supports online buying and selling, while its minority investment in TrueCar broadens digital reach. AN is also adding functionality across research, purchase and vehicle-fulfillment channels to match changing customer preferences. These investments complement store execution, and second-quarter 2026 market share remained consistent with the first quarter in the markets AutoNation serves.
AutoNation continues to deploy capital toward share repurchases, which remains an important lever for per-share earnings and boosts shareholder confidence. From Jan. 1 to July 29, 2026, AutoNation repurchased 2.3 million shares. As of June 30, 2026, $618.9 million remained authorized under the current program.
High Debt & Operating Cost Ail AutoNation
AutoNation’s balance sheet remains leveraged as capital deployment expands. As of June 30, 2026, non-vehicle debt was $4.4 billion, cash was $53 million and liquidity was about $1 billion. The firm’s long-term debt-to-capital ratio stands at 0.72 compared to the industry’s 0.27. High debt restricts the firm’s financial flexibility.
New-vehicle economics remain exposed to vehicle costs, manufacturer incentives and changes in powertrain mix even as sequential profitability has stabilized. In second-quarter 2026, new-vehicle gross profit per unit was $2,381, down 15% from $2,785 a year earlier, while new units fell 4%. The decline reflected higher average vehicle costs and lower manufacturer incentives, with BEV sales down more than 30% year over year. Premium Luxury new units fell 4%, while Domestic units declined 12%. The company expects prior-year tariff and EV-credit comparison effects to ease in the second half, but sustaining margins still depends on vehicle costs and mix.
Operating efficiency remains below the company’s long-term target despite sequential progress. Adjusted SG&A was 68.2% of gross profit in the second quarter of 2026, up from the 66% to 67% target range and 66.2% a year earlier. Advertising costs rose to support vehicle sales, while first-half spending also reflected customer experience investments and higher self-insured losses.
Price Performance, Valuation and Estimates
AN has underperformed the Zacks Automotive - Domestic industry in the last six months. Its shares have gained 1.8% compared to the industry’s growth of 14.3%.
Image Source: Zacks Investment Research
From a valuation perspective, AN appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.23, lower than the industry’s 0.3.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AN’s 2026 EPS has improved 28 cents in the past 30 days.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the auto space are China Yuchai International Limited (CYD - Free Report) and Garrett Motion Inc. (GTX - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CYD’s 2026 sales and earnings implies year-over-year growth of 58.6% and 68.6%, respectively.
The Zacks Consensus Estimate for GTX’s 2026 sales and earnings implies year-over-year growth of 7.2% and 25.7%, respectively. The EPS estimate for 2026 and 2027 has improved 10 cents each over the past 30 days.