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Factors Setting the Stage for AutoNation's (AN) Q4 Earnings

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·6 min read
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AutoNation AN is slated to release fourth-quarter 2021 results on Feb 17, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at $5 per share and $6.37 billion, respectively.

The Zacks Consensus Estimate for AutoNation’s fourth-quarter earnings per share has been revised upward by a penny in the past 30 days. The bottom-line projection implies a year-over-year jump of 105.7%. Also, the Zacks Consensus Estimate for revenues suggests a year-over-year uptick of 10.1%.

The auto retailer came up with better-than-expected results in the last reported quarter on higher-than-anticipated profits from new and used vehicle sales. Operational efficiency also aided the bottom line. The company surpassed earnings estimates in the trailing four quarters, with the average being 41%. Investors expect AN to maintain its earnings beat streak for the fourth quarter of 2021 as well. Encouragingly, our model predicts the same.

AutoNation, Inc. Price and EPS Surprise

AutoNation, Inc. Price and EPS Surprise
AutoNation, Inc. Price and EPS Surprise

AutoNation, Inc. price-eps-surprise | AutoNation, Inc. Quote

Earnings Whispers

Our proven model predicts an earnings beat for AutoNation for the to-be-reported quarter, as it has the right combination of the two key ingredients. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: AutoNation has an Earnings ESP of +1.97%. This is because the Most Accurate Estimate is pegged 10 cents above the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AutoNation currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Buyout Highlights

At the beginning of fourth-quarter of 2021, AutoNation acquired 11 stores and a collision center from Peacock Automotive Group. The deal marked the first franchised dealership buyout since 2018 and is likely to add $380 million in annual revenues. The buyout expanded AutoNation's footprint from coast to coast to more than 325 locations.

During the quarter to be reported, AutoNation also completed the acquisition of Priority 1 Automotive Group. The deal, which added nine Maryland dealerships to AutoNation’s portfolio, would add around $420 million in annual revenues.

Poised for a Q4 Beat

Courtesy of economic recovery from the pandemic lows and preference for personal mobility, demand for vehicles has been on the rise, which is likely to have aided AutoNation’s sales. The automotive retailer’s fourth-quarter results will reflect the rising average prices of both new and used vehicles.

AN’s digital platform AutoNation Express stepped up its digitization game, which is expected to have aided sales in the quarter. Increased focus on cost discipline is anticipated to have aided fourth-quarter margins. Its adjusted SG&A as a percentage of gross profit was 56.9% in the last reported quarter, representing a 750-basis point improvement year over year. The trend is expected to have continued in fourth-quarter 2021 as well.

Key Predictions

The Zacks Consensus Estimate for total retail vehicle sales for the quarter to be reported is pegged at 135,057 units, indicating an increase from 133,930 in the year-ago period, primarily led by growth in used-vehicle sales.

The estimate for used vehicle retail sales stands at 75,831 units, implying an uptick from 61,526 units in fourth-quarter 2020. The consensus mark for revenues and gross profit from used-vehicle sales is pegged at $2,211 million and $104.1 million, suggesting growth from the year-ago levels of $1,511 million and $104 million, respectively.

The gross profit estimate for new vehicle, finance and insurance, and parts and services is pegged at $316 million, $354 million, and $430 million, signaling growth from $201 million, $296 million and $385 million, respectively.

Higher year-over-year projected gross profit across all business operations — new and vehicle sales, parts and services, and finance and insurance — is likely to aid the upcoming results.

How Did AutoNation’s Peers Fare in Q4?

Below we have highlighted major takeaways from the fourth-quarter 2021 releases of a few other auto retailers including Lithia Motors LAD, Group 1 Automotive GPI and Penske Automotive PAG.

Lithia reported fourth-quarter adjusted earnings of $11.39 per share, reflecting a whopping 109% increase from the prior-year quarter’s $5.46. The figure also beat the Zacks Consensus Estimate of $9.99. Total revenues jumped 60.1% year over year to $6,309.5 million but missed the Zacks Consensus Estimate of $6,318.4 million.

LAD claims to have reported the highest fourth-quarter earnings and revenues in its history. Lithia had cash and cash equivalents of $174.8 million as of Dec 31, 2021. Long-term debt was $3,185.7 million, marking a 54.3% increase from $2,064.7 million as of Dec 31, 2020.

Group 1 reported fourth-quarter 2021 adjusted earnings per share of $9.43, beating the Zacks Consensus Estimate of $9.06 and increasing from the prior-year quarter’s $5.66. The automotive retailer registered net sales of $3,489.6 million, beating the Zacks Consensus Estimate of $3,478.8 million and rising 16.7% from the year-ago level.

Group 1 Automotive had cash and cash equivalents of $14.9 million as of Dec 31, 2021, down from $69 million in the corresponding period of 2020. Total debt totaled $2,035.7 million as of Dec 31, 2021, significantly up from the $1,336.6 million recorded in the comparable period of 2020.

Penske reported fourth-quarter adjusted earnings of $4.10 per share, increasing 65% year over year and surpassing the Zacks Consensus Estimate of $3.67. The auto retailer registered net sales of $6,296.1 million, outpacing the Zacks Consensus Estimate of $6,227.5 million and rising 8.3% from the comparable year-ago period.

Penske had cash and cash equivalents of $100.7 million as of Dec 31, 2021, up from $49.5 million at 2020-end. Long-term debt amounted to $1,392 million, down from $1,602.1 million as of Dec 31, 2020.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report

AutoNation, Inc. (AN) : Free Stock Analysis Report

Group 1 Automotive, Inc. (GPI) : Free Stock Analysis Report

Lithia Motors, Inc. (LAD) : Free Stock Analysis Report

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