AutoNation Beats Estimates

Zacks

AutoNation Inc. (AN) posted a 31.4% increase in earnings per share from continuing operations to 67 cents in the fourth quarter of 2012 from 51 cents in the corresponding quarter last year. With this, profits surpassed the Zacks Consensus Estimate by 2 cents. In absolute terms, profits escalated 16.3% to $82.9 million from $71.3 million in the year-ago quarter.

Revenues for the quarter increased 13.5% to $4.2 billion from $3.7 billion in the year-ago quarter. The growth in revenues was driven by strong performance of all the businesses. Revenues were ahead of the Zacks Consensus Estimate of $4.0 billion.

AutoNation reported adjusted earnings from continuing operation of $2.54 per share for 2012, up 30.9% from $1.94 a year ago. Net income increased 12% to $319.9 million from $285.6 million in 2011. The company’s revenues for the year increased 13.3% to $15.7 billion from $13.8 billion in 2011, driven by better performance in all the businesses.

AutoNation announced the launch of AutoNation brand. The company will be marketing 210 Domestic and Import franchises under this brand. The transition will be taking place for 23 manufacturer brands from Feb 1 in South Florida and will close by the second quarter of 2013. This strategy will support the company in maintaining its leadership, transparency and customer service.

Revenues from new vehicle sales improved 18.7% to $2.5 billion in the quarter. New vehicle retail sales increased 17.9% to 70,957 units. However, revenues per vehicle increased marginally by 1% to $34,894. On a same-store basis, new vehicle retail sales went up 17.4% to 70,644 units.

Revenues from used vehicle (retail and wholesale) crept up 3.4% to $912.1 million in the quarter. Used vehicle retail sales improved 2.5% to 42,987 units with revenues per vehicle increasing 2.1% to $18,342. Same-store used vehicle sales rose 1.8% to 42,711 units.

Revenues from parts and services went up 4.7% to $600.0 million. Meanwhile, the company’s finance and insurance business witnessed a 19.2% rise in revenues to $148.9 million.

Gross profit increased 9.3% to $632.8 million from $579.2 million in the year-ago quarter. The improvement was driven by higher gross profit earned from the finance and insurance and used vehicle businesses.

Gross profit per new vehicle retailed decreased 10.7% to $2,189 while gross profit per used vehicle retailed rose 6.1% to $1,575. Gross profit from finance and insurance per vehicle retailed swelled 6.9% to $1,307. Operating income improved 17.6% to $168.7 million from $143.5 million in the fourth quarter of 2011.

Segment Detail

Revenues in the Domestic segment improved 9.3% to $1.3 billion. Unit sales augmented 9% to 21,862 vehicles. Segment operating income improved 22.9% to $54.2 million from $44.1 million in the fourth quarter of 2011.

In 2012, the segment recorded a 10.2% rise in revenues to $5.1 billion with 12.6% increase in unit sales to 85,947 vehicles. Segment operating income went up 16.3% to $209.4 million from $180.0 million in 2011.

Revenues from the Import segment increased 17.9% to $1.5 billion. Unit sales surged 23.7% to 33,607 automobiles. Segment operating income increased 22.3% to $59.8 million from $48.9 million a year ago.

In 2012, the Import segment recorded a 18.2% rise in revenues to $5.8 billion with a 26.1% increase in unit sales to 133,938 vehicles. Segment operating income went up 13.6% to $257.9 million from $227.1 million in 2011.

Revenues in the Premium Luxury segment went up 13.5% to $1.4 billion. Unit sales rose 19.5% to 15,488 vehicles. Segment operating income climbed 9.5% to $80.4 million from $73.4 million in the corresponding quarter last year.

In 2012, segment revenues went up 11.2% to $4.6 billion driven by a 15.4% rise in unit sales to 47,925 vehicles. Segment operating income climbed 10.8% to $270.4 million from $244.1 million in 2011.

Financial Details

AutoNation’s cash and cash equivalents decreased to $69.7 million as of Dec 31, 2012 from $86.6 million as of Dec 31, 2011. The company’s inventory was valued at $2.4 billion as of Dec 31, 2012 versus $1.8 billion as of Dec 31, 2011. Meanwhile, capital expenditures increased to $183.6 million in 2012 from $158.1 million in 2011.

Our Take

Headquartered in Fort Lauderdale, Florida, AutoNation is the largest automotive retailer in the U.S. The company owns and operates about 264 new vehicle franchises that sell 32 brands located in the major metropolitan markets across 15 states.

The company offers an array of automotive products and services, ranging from new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, vehicle protection products to other aftermarket products. It retains a Zacks Rank #2 (Buy).

Lithia Motors Inc. (LAD), Asbury Automotive Group, Inc. (ABG) and Group 1 Automotive Inc. (GPI) are performing well in the same industry where AutoNation operates. Lithia Motors and Asbury Automotive are Zacks Rank #1 (Strong Buy) stocks while Group 1 Automotive carries a Zacks Rank #2 (Buy).

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