AutoNation Sales Climb 13 Percent in Q2

Andrew Klips |

S&P 500 component AutoNation, Inc. (AN) , the biggest auto retailer in the U.S., on Thursday reported growing sales and profits in the second quarter, boosted by a stronger performance in all of its business sectors as it aligns for high-margin profits in the future.

The Fort Lauderdale, Florida-based company posted revenue of $4.43 billion for the quarter, up 13 percent from $3.90 billion in the year prior quarter.  Net income for the quarter was $89.9 million, or 73 cents per share, compared to $78.6 million, or 64 cents per share, in last year’s quarter.  On a per-share basis, it was the highest profits ever recorded by AutoNation.

Wall Street was expecting profits of 73 cents per share on revenue of $4.33 billion.

AutoNation’s new vehicle segment, the company’s biggest revenue driver, grew by 11 percent year-over-year – from $2.2 billion to $2.5 billion – as auto sales in the U.S. continue to be a strong point for the economy.  Used vehicle sales rose from $947.4 million last year to $1.06 billion in the latest quarter.  Profits and sales rose in all three segments AutoNation tracks: domestic, import and luxury.

Same-store sales increased 7 percent versus a year earlier.

The quarter ended with AutoNation owning and operating 266 new vehicle franchises.  During the second quarter, the company acquired two new stores in the Phoenix market and one in the Dallas market.  Mercedes-Benz also awarded AutoNation a new franchise in the Atlanta market and another in the Tampa market during the quarter.

In the last year, the company has acquired 10 franchises and been awarded four by manufacturers, new locations that it believes will generate $1 billion in annual revenue once fully operational.

Parts and service, a key profit driver for any car dealer, improved 9 percent to $655.9 million.  To demonstrate how valuable this component is, gross profit on $2.5 billion in new vehicle sales was $149.2 million, whereas gross profit on the $655.9 million in parts and service was $280.2 million.  Overall, gross margins narrowed from 16.1 percent to 15.7 percent.

More cars being sold bodes well for future parts and service sales at AutoNation as consumers bring their cars in for tires, repairs and other services.

“We are particularly excited about our customer care business, where increasing units in operation should continue to support solid growth in the business for the next several years," said Mike Jackson, chairman and chief executive at AutoNation.

The company also reported healthy percentage gains in its finance and insurance business, which rose about 20 percent to $173.9 million as compared to Q2 2012.

Shares of AN are up about 15 percent in 2013, trailing the S&P 500’s gains of 18 percent.  In pre-market activity on Thursday, shares of AN have inched lower by 1.9 percent from Wednesday’s closing price of $45.47, albeit on nominal volume.  Apparently, investors are overwhelmed with the earnings match and slightly better-than-expected revenue.

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Companies

Symbol Name Price Change % Volume
AN AutoNation Inc. 47.26 -0.19 -0.40 1,219,826
GKNID Anchorage Intl Hldgs Corp n/a n/a n/a 0

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