AutoNation (AN) Beats on Q2 Earnings, Announces $1B Buyback

AutoNation, Inc. AN reported second-quarter 2022 adjusted earnings of $6.48 per share, which jumped 34% year over year and topped the Zacks Consensus Estimate of $5.96. This outperformance can be primarily attributed to the higher-than-expected sales of used vehicle and the finance and insurance unit.

In the reported quarter, revenues amounted to $6,869.2 million, shrinking 2% year over year but topping the Zacks Consensus Estimate of $6,721 million.

Key Takeaways

In the reported quarter, new-vehicle revenues inched down 14.4% year over year to $2,935.8 million. It, however, topped the Zacks Consensus Estimate of $2,891 million. Gross profit from the segment came in at $353.5 million, rising 10.3% from $320.5 million reported in the prior-year quarter and matching the consensus mark.

Used-vehicle revenues rose 13.4% from the year-ago figure to $2,520.4 million, beating the consensus mark of $2,399 million. Gross profit from the segment came in at $156.5 million, going down 22.8% but topping the consensus mark of $152 million.

Net revenues in the finance and insurance business amounted to $367.6 million, nominally down 0.4% from the year-ago quarter but crossing the consensus mark of $362 million. Gross profit was $367.6 million.

Revenues from the parts and service business rose 9% to $1,036.3 million, missing the consensus metric of $1,063 million. Gross profit from this segment came in at $482 million, rising 11.4% year over year and marginally beating the consensus mark of $481 million.

The company announced that it has entered into an agreement to acquire CIG Financial, an auto finance company, headquartered in Irvine, CA. The acquisition will take AutoNation's relationship with its customers beyond the buying experience and throughout the vehicle ownership life cycle. The transaction is expected to close within the upcoming 90 days, subject to customary closing conditions and regulatory approvals.

AutoNation plans to open its 12th AutoNation USA store in the third quarter in Kennesaw, GA and targets to have more than 130 AutoNation USA stores in operation, from coast to coast, by the end of 2026.

Segmental Details

Revenues from the Domestic segment were down 3.9% year over year to $2,040.9 million. The segment’s income inched down 9.4% to $153.1 million in the reported quarter.

Revenues from the Import segment shrunk 10.4% from the prior-year quarter to $1,949.7 million. The segment’s income also contracted 5.5% to $192.5 million.

Premium Luxury segment sales rose 6% to $2,616.6 million. The segmental income also rose 14.1% year over year to $257.5 million in the reported quarter.

Financial Tidbits

The adjusted SG&A expenses, as a percentage of gross profit, was 55.4%, an improvement of 110 basis points compared to the year-ago period. Expenses rose to $754.8 million from $748.9 million in the year-ago quarter.

AutoNation’s cash and cash equivalents were $336.5 million as of Jun 30, 2022, a whopping rise from $59.5 million in the year-ago period. The company’s liquidity was $2.1 billion, including $337 million in cash and nearly $1.8 billion available under its revolving credit facility.

The firm’s inventory was valued at $ 1,905.3 million. At the end of the second quarter, non-vehicle debt was $3,546.5 million, increasing significantly from $1,997.3 million in the year ago quarter. Capital expenditure in the quarter amounted to $106.1 million, increasing from $74.3 million in the year-ago period.

During the second quarter of 2022, AutoNation repurchased 3.7 million shares of common stock for an aggregate purchase price of $404 million. As of Jul 19, 2022, AutoNation had approximately 56 million shares outstanding. The company has also authorized the repurchase of up to an additional $1 billion of its common stock.

Zacks Rank & Key Picks

AN carries a Zacks Rank #3 (Hold), currently.

Better-ranked players in the auto space include CarParts.com PRTS, American Axle & Manufacturing Holdings AXL and Standard Motor Products SMP, each carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

CarParts has an expected earnings growth rate of 35% for the current year. The Zacks Consensus Estimate for current-year earnings has been kept constant in the past 30 days.

CarParts Group’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. PRTS pulled off a trailing four-quarter earnings surprise of 78.34%, on average. The stock has declined 51.2% over the past year.

American Axle has an expected earnings growth rate of 93.9% for 2023. The Zacks Consensus Estimate for current-year earnings has been revised 1.2% in the past 30 days.

American Axle’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. AXL pulled off a trailing four-quarter earnings surprise of 847.92%, on average. The stock has declined 8.7% in the past year.

Standard Motor has an expected earnings growth rate of 5.2% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.

Standard Motor’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. SMP pulled off a trailing four-quarter earnings surprise of 40.34%, on average. The stock has risen 11% over the past year.

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