AutoNation (AN) Tops Q1 Earnings And Revenues

AutoNation Inc. (AN) is the largest automotive retailer in the U.S. and is about twice the size of its nearest competitor. The company is positioned to benefit from recovery in the auto market, backed by its optimal brand and market mix as well as a disciplined cost structure. Rising average age of cars and trucks in the U.S., a robust consumer credit environment and an increase in new product offerings from automotive manufacturers is leading to a strong selling environment.

However, AutoNation operates in a highly competitive industry. In addition, the company’s performance is dependent on automakers. The automakers need to supply adequate attractive, high-quality and desirable product mix at the right time in order to satisfy the rising demand of customers. Thus, any fluctuation in supply will adversely affect the results of the company.

 

Estimate Trend & Surprise History

Investors should note that the first-quarter earnings estimate for AutoNation has been stationary over the past week and month. The Zacks Consensus Estimate has remained static at 87 cents over these periods.

AutoNation has a mixed history of earnings surprises. It has beaten the Zacks Consensus Estimate in 2 of the trailing 4 quarters with a positive average beat of 2.73%.

We have highlighted some of the key stats from this just-revealed announcement below:

 

Earnings

AutoNation delivered earnings of 97 cents per share in the first quarter of 2015, surpassing the Zacks Consensus Estimate of 87 cents.

Revenues

AutoNation reported revenues of $4.94 billion, up 13.3% year over year. Revenues surpassed the Zacks Consensus Estimate of $4.78 billion.

Key Stats/Developments to Note

AutoNation expects to benefit from improved new vehicle unit sales this year. In 2015, industry new vehicle sales are expected to be above 17 million units.

AutoNation continues to expand its business through acquisitions. In April 2015, it completed the acquisitions of a Mercedes-Benz store in San Jose, CA and a Chrysler Dodge Jeep Ram store in Valencia, CA. AutoNation has also signed an agreement to acquire a Jaguar, Land Rover and Volvo store in Spokane, WA, subject to customary terms and conditions.

In the first quarter of 2015, AutoNation completed the acquisitions of a Mercedes-Benz store in Reno, NV and a Volkswagen store in the Atlanta, GA market. The combined annual revenue from all the stores acquired since the beginning of 2015, including the Jaguar, Land Rover and Volvo store, is $320 million.

Zacks Rank

Currently, AutoNation has a Zacks Rank #2 (Buy), but that could change following its earnings report which has just released.

Market Reaction

AutoNation’ shares have gained 2.47% to $66.50 following the release. Clearly, the initial reaction to the release is positive.