AutoNation (AN) Q3 Earnings Beat Estimates, Revenues Miss

AutoNation Inc. AN reported adjusted earnings of $1.08 per share in third-quarter 2017, which surpassed the Zacks Consensus Estimate of 84 cents. Earnings per share from continuing operations in third-quarter 2016 were $1.05.

Net income from continuing operations declined to $98 million from $108 million in third-quarter 2016.

During the quarter, AutoNation reported revenues of $5.43 billion, declining 2.4% year over year. Also, revenues missed the Zacks Consensus Estimate of $5.57 billion.

New vehicle revenues decreased to $3.11 billion in third-quarter 2017, from $3.20 billion in third-quarter 2016. Used vehicle revenues also declined 3.8% year over year to $1.23 billion. Parts and service business revenues came in at $841.6 million in third-quarter 2017 compared with $843.8 million in the prior-year quarter. Finance and insurance business revenues came in at $241.6 million, reflecting an increase of 5.2%.

Along with the earnings release, AutoNation announced the inking of a multi-year deal with Waymo, a self-driving technology company, to support the latter’s autonomous vehicle program. AutoNation will provide strategic capabilities to enhance the life of Waymo’s vehicles in the United States. Following this, shares of AutoNation jumped 14.8% to $54.65 in yesterday's trading session.

Segment Details

Revenues at the Domestic segment — comprising stores that sell vehicles manufactured by General Motors Co. GM, Ford Motor Co. F and others — declined 6.5% to $1.91 billion. The segment’s income declined 18% to $69 million in the quarter under review.

Revenues at the Import segment — comprising stores that sell vehicles manufactured primarily by Toyota Motor Corp. TM and other automakers — increased 0.6% to $1.79 billion. However, segment income declined 1% to $228 million in the reported quarter.

Revenues at the Premium Luxury segment — consisting of stores that sell vehicles manufactured primarily by Mercedes, BMW and Lexus — plunged 46.3% to $1.63 billion. The segment’s income declined 5% to $243 million in the reported quarter.

Balance Sheet and Capex

AutoNation’s cash and cash equivalents were $53.3 million as of Sep 30, 2017, declining from $62.2 million as of Sep 30, 2016. The company’s inventory was valued at $3.41 billion as of Sep 30, 2017 compared with $3.45 billion as of Sep 30, 2016.

Non-vehicle debt increased to $2.86 billion from $2.76 billion as of Sep 30, 2016. Capital expenditures were $55.9 million in third-quarter 2017 compared with $69.3 million in the prior-year period.

Share Repurchases

In third-quarter 2017, the company repurchased 9.2 million shares for $400 million. As of Oct 31, 2017, AutoNation had approximately $114 million remaining under its share repurchase program and around 91 million shares outstanding.

Zacks Rank

AutoNation, General Motors and Toyota currently carry a Zacks Rank #3 (Hold), while Ford has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AutoNation, General Motors, Toyota and Ford currently have long-term earnings growth rates of 8.6%, 9.2%, 5.6% and 10.7%, respectively.

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