AutoNation (AN) Down 11.5% Since Earnings Report: Can It Rebound? – March 6, 2017


A month has gone by since the last earnings report for AutoNation, Inc. (AN Free Report) . Shares have lost about 11.5% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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 drivers.

AutoNation’s Fourth-Quarter Earnings & Revenues Miss Estimates

AutoNation reported adjusted earnings of $0.95 per share in fourth-quarter 2016, which decreased from $0.96 in the fourth quarter of 2015. Adjusted earnings also missed the Zacks Consensus Estimate of $0.96. Adjusted earnings exclude $0.19 per share gain related to the business divestiture.

Net income rose to $115.3 million from $97.5 million in fourth-quarter 2015. Operating income increased 18.1% to $236.6 million from $200.4 million a year ago.

AutoNation reported revenues of $5.48 billion, up 2.6% year over year. However, revenues fell short of the Zacks Consensus Estimate of $5.59 billion. The year-over-year improvement in the top line can be attributed to better performance across all the businesses.

New vehicle revenues inched up 1.4% to $3.2 billion despite a 1.3% fall in new vehicle unit sales to 84,622 vehicles. Revenues per vehicle retailed went up 2.7% to $37,671. On a same-store basis, new vehicle revenues declined 2.4% to $2.97 billion.

Used vehicle (retail and wholesale) revenues climbed 5.5% to $1.22 billion on a 4.4% and 18.3% revenue rise in the retail sector and wholesale sector, respectively. Retail unit sales fell 2.4% to 55,213 vehicles while revenues per vehicle retailed rose 2% to $20,128. On a same-store basis, used vehicle revenues improved 2.3% to $1.14 billion.

Revenues at the parts and service business advanced 5.7% to $822.5 million in the reported quarter. Meanwhile, the finance and insurance business recorded a 0.1% increase in revenues to $216.5 million.

2016 Performance

AutoNation posted a year-over-year rise of 7% in earnings to $4.16 per share for full-year 2016. The figure surpassed the Zacks Consensus Estimate of $4.04. Revenues for 2016 were up 4% to roughly $21.6 billion from $20.9 billion in 2015. The figure missed the Zacks Consensus Estimate of $21.7 billion.

Segment Details

Revenues at the Domestic segment advanced 8.5% to $1.9 billion as retail new vehicle unit sales rose 4.7% to 28,711 vehicles. The segment’s income fell 17.8% to $64.2 million in the quarter under review.

Revenues at the Import segment dipped 2.4% to $1.68 billion owing to a 5.5% fall in retail new vehicle unit sales to 36,488 automobiles. Segment income decreased 5.6% to $66.8 million in the reported quarter.

Revenues at the Premium Luxury segment edged down 0.3% to $1.79 billion. Retail new vehicle sales contracted 1.4% to 19,423 luxury vehicles. The segment’s income declined 8.7% to $93.4 million in the reported quarter.

Balance Sheet and Capex

AutoNation’s cash and cash equivalents fell to $64.8 million as of Dec 31, 2016, from $74.1 million as of Dec 31, 2015. The company’s inventory was valued at $3.52 billion as of Dec 31, 2016, compared with $3.61 billion as of Dec 31, 2015.

Non-vehicle debt increased to $2.72 billion from $2.36 billion as of Dec 31, 2015. Capital expenditures were $253.2 million in 2016 compared with $266.9 million in the prior year.

Share Repurchases

During 2016, the company repurchased 10.5 million shares for $497 million. As of Feb 1, 2017, AutoNation had approximately $299 million remaining under its share repurchase program and around 101 million shares outstanding.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter. In the past month, the consensus estimate has shifted 10.28% downward due to these changes.

VGM Scores

At this time, AutoNation’s stock has a subpar score of ‘D’ on both growth and momentum front. However, 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 aggregte VGM Score of ‘C’. If you aren’t focused on one strategy, this score is the one you should be interested in.

The company’s stock is suitable solely for value based on our styles scores.


Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It’s no surprise that the stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.