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AutoNation (AN) Q2 Earnings Beat Estimates, Revenues Miss

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AutoNation Inc. (AN - Free Report) reported adjusted earnings of $1.14 per share in second-quarter 2018, surpassing the Zacks Consensus Estimate of $1.13. Excluding the after-tax non-cash franchise rights impairment charge of $6 million, earnings were $1.07 per share. In the year-ago quarter, the bottom line was 86 cents.

Net income from continuing operations was $97.6 million compared with $87.7 million in second-quarter 2017.

During the quarter under review, AutoNation reported revenues of $5.39 billion, rising 2% year over year. However, the top line missed the Zacks Consensus Estimate of $5.41 billion.

AutoNation, Inc. Price, Consensus and EPS Surprise

 

During the reported quarter, new-vehicle revenues increased 0.6% year over year to $2.9 billion in second-quarter 2018. Used-vehicle revenues rose 8.1% year over year to $1.3 billion. Parts and service business revenues were $857 million, almost in line with the prior-year quarter. Net revenues from finance and insurance business were $248 million, reflecting an 8.3% increase.

Segmental Details

Revenues at the Domestic segment — comprising stores that sell vehicles manufactured by General Motors, Ford and FCA US — declined 1% to $1.8 billion. The segment’s income increased 12% to $60 million in the quarter under review.

Revenues at the Import segment — consisting of outlets that sell vehicles manufactured primarily by Toyota, Honda, Nissan and Hyundai — increased 0.9% to $1.7 billion. However, the segment’s income gained 4% to $78 million in the reported quarter.

Revenues at the Premium Luxury segment comprise of stores that retails vehicles manufactured by Mercedes-Benz, BMW, Lexus and Audi. The sales figure rose 5.2% to $1.7 billion. Segmental income grew 1% to $84 million in the reported quarter.

Balance Sheet and Capex

AutoNation’s cash and cash equivalents were $53.1 million as of June 30, 2018, declining from $69.2 million as of Dec 31, 2017. The company’s inventory was valued at $3.6 billion as of Jun 30, 2018, compared with $3.4 billion as of Dec 31, 2017.

As of Mar 31, 2018, the non-vehicle debt was $2.7 billion compared with $2.6 billion in the prior-year quarter. At the end of second-quarter 2018, capital expenditure was $103.2 million compared with $82 million in the prior year.

Share Repurchases

During the reported quarter, the company repurchased 1.6 million shares for $73 million. As of Jul 30, 2018, AutoNation had roughly $264 million authorization for share repurchase and around 90 million shares outstanding.

Acquisition

The company announced the acquisition of Shelly BMW store in the Southern California market. With retail sales of roughly 2,600 new and used vehicles, the annual revenues of the store were approximately $140 million. Further, it has also signed an agreement to acquire Trade Secret Auto Care, a collision center in the Dallas, TX. This acquisition will mark the 81st collision and repair center for AutoNation.

Zacks Rank & Key Picks

AutoNation currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Honda Motor Co., Ltd. (HMC - Free Report) , AB Volvo (VLVLY - Free Report) and Allison Transmission Holdings, Inc. (ALSN - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Honda has an expected long-term growth rate of 3%. Over a year, shares of the company have gained 6%.

Volvo has an expected long-term growth rate of 15%. Over a year, shares of the company have gained 1.3%.

Allison Transmission has an expected long-term growth rate of 10%. Shares of the company have risen 23.3% in the past year.

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