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AutoNation Sales Up 15% in May

Zacks Equity Research

Total retail sales of new vehicles of automotive retailer AutoNation Inc. (AN) increased 15% year over year to 30,275 units in May 2014. On a same-store basis, retail new vehicle sales increased 12% from May 2013 to 29,471 units.

Retail new vehicle unit sales in AutoNation’s Domestic segment improved 12% to 9,289 vehicles. The segment comprises retail automotive franchises that sell vehicles manufactured by Ford Motor Co. (F), Chrysler and other automakers.

Sales in AutoNation’s Import segment escalated 17% to 15,413 vehicles in May 2014 from the corresponding month last year. The segment covers retail automotive franchises that sell vehicles manufactured by Toyota Motor Corporation (TM), Honda Motor Co., Ltd. (HMC) and others.

In the Premium Luxury segment of AutoNation, sales surged 14% year over year to 5,573 vehicles during the month. This segment consists of retail automotive franchises selling vehicles manufactured by Mercedes Benz, BMW, Lexus and other carmakers.

Acquisition

AutoNation announced an agreement to purchase Roundtree Chrysler Dodge Jeep Ram in Mobile, AL. This is expected to boost the company’s revenues as the store is expected to generate annual revenues of $95 million. The acquisition is expected to be completed in the third quarter of 2014, subject to customary closing conditions and manufacturer approval. AutoNation already owns Ford and Honda franchises in Mobile.

Earnings Review

AutoNation posted a 10.3% rise in earnings per share to 75 cents in the first quarter of 2014 from 68 cents in the same quarter of 2013. However, earnings per share were in line with the Zacks Consensus Estimate. Net income improved 8.8% to $90.5 million from $83.2 million in the first quarter of 2013.

Revenues increased 6.5% to $4.36 billion, marginally missing the Zacks Consensus Estimate of $4.39 billion. The revenue growth was attributable to strong performance in all business sectors. The company’s Premium Luxury segment was the biggest gainer in the quarter.

AutoNation currently holds a Zacks Rank #3 (Hold).

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