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A month has gone by since the last earnings report for AutoNation (AN). Shares have added about 13.8% in that time frame, outperforming 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 Q4 Earnings Results Impress
AutoNation reported reported fourth-quarter 2020 adjusted earnings of $2.43 per share, increasing 94% year over year and topping the Zacks Consensus Estimate of $2.00. Higher-than-expected new and used vehicle sales led to the outperformance. Precisely, revenues from new and used vehicles came in at $3,127 million and $1,511.2 million, outpacing the Zacks Consensus Estimate of $2,932 million and $1,404 million, respectively.
Operational efficiency also aided the bottom line. Adjusted SG&A expenses as a percentage of gross profit were 63.8% for the quarter under review, marking an 820-basis point increase from the corresponding period of 2019. For the reported quarter, AutoNation’s revenues amounted to $5,785.1 million, up 4% year over year. The top line also surpassed the Zacks Consensus Estimate of $5,607 million.
For the quarter under review, new-vehicle revenues edged up 3.3% year over year to $3,127 million. Used-vehicle revenues rose 12.4% from the year-ago figure to $1,511.2 million. Revenues from the parts and service business, however, slid 5.9% from the prior-year quarter to $838.4 million. Net revenues in the finance and insurance business amounted to $295.9 million, up from $264.4 million recorded in the year-ago quarter.
AutoNation intends to build in excess of 100 stand-alone pre-owned vehicle stores, with more than 50 by 2025-end. It is on track to open five new stores by 2021-end in Phoenix, Austin, San Antonio and Denver. The company will open 10 additional new stores next year. The automotive retailer has sharpened focus on ramping up digital capabilities in response to changing buying behaviors of consumers amid the pandemic.
It should be noted that AutoNation sold its stake in online retailer Vroom.During the quarter under review, AutoNation sold 3.1 million shares of its stake in Vroom for $105 million, which resulted in a cash gain of $78 million. Early this year, it sold the remaining stake in Vroom for $109 million, which led to a cash gain of $87 million. Overall, AutoNation realized a cash gain of $165 million from the Vroom investment.
Revenues in the Domestic segment increased 7.2% year over year to $1,786.6 million. The segment’s income jumped 64.3% year over year to $107.1 million for the quarter under review. The segment comprises stores that sell vehicles manufactured by General Motors, Ford and FCA US.
Revenues in the Import segment were up 3.5% from the prior-year quarter to $1,679.1 million. The segment’s income climbed 39.9% year over year to $108.7 million for the reported quarter. The segment consists of outlets that sell vehicles manufactured primarily by Toyota, Honda, Subaru, Hyundai and Nissan.
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 grew 4.5% from a year ago to $2,151.2 million. Segmental income also rose 16.6% year over year to $164.9 million for the reported quarter.
AutoNation’s cash and cash equivalents were $569.6 million as of Dec 31, 2020. The company’s liquidity position at year-end was $2.3 billion, including $1.8 billion in credit revolver. The firm’s inventory was valued at $2,598.5 million. At fourth quarter-end, non-vehicle debt was $2,101.8 million. Capital expenditure for the quarter amounted to $45.3 million.
During the reported quarter, AutoNation bought back 4.7 million shares worth $302 million. From Jan 1, 2021 through Feb 12, it repurchased an additional $1.3 million shares worth $95 million. Encouragingly, the company increased the share-buyback authorization to $1 billion. AutoNation now has $1.1 billion remaining under the current share-repurchase authorization.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.98% due to these changes.
At this time, AutoNation has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise AutoNation has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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AutoNation, Inc. (AN) : Free Stock Analysis Report
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