A month has gone by since the last earnings report for AutoNation (AN). Shares have added about 0.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is AutoNation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AutoNation’s Q3 Earnings Surpass Estimates, Down Y/Y
AutoNation Inc. delivered third-quarter 2019 adjusted earnings of $1.18 per share, beating the Zacks Consensus Estimate of $1.11 per share. The reported figure, however, came in lower than the year-ago quarter’s $1.24 per share.
During the reported quarter, AutoNation’s revenues amounted to $5.46 billion compared with the $5.35 billion recorded in the prior-year quarter. The top-line figure also surpassed the Zacks Consensus Estimate of $5.34 billion.
In the quarter, same-store gross profit increased 5%, year on year, to $877 million, driven by growth in Customer Financial Services, Customer Care, and Used Vehicle gross profit. Net income from continuing operations was $100 million compared with the $112 million reported in third-quarter 2018.
During the third quarter, new-vehicle revenues declined 2% year over year to $2.87 billion. Used-vehicle revenues rose 9.5% to $1.4 billion from the year-ago quarter’s figure. Revenues in the parts and service business gained 4.5% to $902.6 million from third-quarter 2018. Net revenues in the finance and insurance business amounted to $266.2 million, up 7.6% from the prior-year quarter’s level.
Revenues in the Domestic segment declined 3.4% year over year to $1.73 billion. The segment’s income increased 5% to $70 million in the July-September quarter. The segment comprises stores that sell vehicles manufactured by General Motors, Ford and FCA US.
Revenues in the Import segment fell 2.7% to $1.72 billion. Nevertheless, the segment’s income rose 2% to $87 million in the reported quarter. The segment consists of outlets that sell vehicles manufactured primarily by Toyota, Honda, Nissan and Hyundai.
The Premium Luxury segment comprises stores that sell retail vehicles manufactured by Mercedes-Benz, BMW, Lexus, Jaguar Land Rover and Audi. Sales in the segment increased 9.1% to $1.82 billion. Segmental income jumped 16% to $89 million in the reported quarter.
Balance Sheet and Capex
AutoNation’s cash and cash equivalents were $45 million as of Sep 30, 2019 compared with $52.6 million as of Sep 30, 2018. The company’s inventory was valued at $3.28 billion as of Sep 30, 2019 compared with $3.38 billion in the prior-year period.
At the end of the third quarter, non-vehicle debt was $2.27 billion compared with $2.57 billion in the prior-year quarter. At the end of the quarter, capital expenditures were $62.6 million compared with the year-earlier quarter’s $88.9 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 6.47% due to these changes.
At this time, AutoNation has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, AutoNation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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