AutoNation Profits on New Vehicles - Analyst Blog

AutoNation Inc. (AN) showed a 55% rise in profit to 45 cents per share in the fourth quarter of 2010 from 29 cents per share in the year-ago quarter. The profit was higher than the Zacks Consensus Estimate by 10 cents per share. In absolute terms, profit rose 36% to $68 million from $50 million. The increase in profit was attributable to impressive growth in new vehicle sales during the quarter.

Revenues in the quarter scaled up 16% to $3.25 billion, driven by a stark 15% improvement in the revenues from new vehicle. It has beaten the Zacks Consensus Estimate of $3.05 billion. Operating income increased to $134.6 million from $95.3 million a year ago.

New vehicle revenues were $1.78 billion translating into revenue per vehicle of $33,465, a marginal increase from the year ago level. The retailer's new vehicle sales grew 15% to 53,151 units. The rise in unit sales exceeded the growth in industry sales by 9 percentage points. The company expects industry new vehicle sales of 12.8 million units for full year 2011.

Used vehicle (retail and wholesale) revenues went up 24% to $788.4 million. Used vehicle sales rose 21% to 39,106 units, transforming into per vehicle revenue of $17,534.

Revenues in the parts and services business grew 9% to $560.2 million while that in the finance and insurance business rose 21% to $107 million.

Segment Performance

Revenues in the Domestic segment – comprising stores that sell vehicles manufactured by General Motors (GM), Ford Motor (F) and Chrysler – hiked 21% to $1.06 billion, driven in part by strong pick-up truck sales. Unit sales rose 22% to 16,555 vehicles. Segment operating income improved to $37 million from $24 million in the fourth quarter of 2009.

Revenues in the Import segment – comprising stores that sell vehicles manufactured primarily by Toyota Motor (TM), Honda Motor (HMC) and Nissan Motor (NSANY) – advanced 15% to $1.18 billion. Unit sales increased 14% to 26,904 vehicles. Segment operating income increased by $5 million to $46 million from the year ago quarter.

Revenues in the Premium Luxury segment – comprising stores that sell vehicles manufactured primarily by Daimler AG's (DDAIF) Mercedes, and BMW and Lexus – went up 12% to $962.8 million. Unit sales rose 4% to 9,692 vehicles. Segment operating income rose to $66 million from $48 million in the comparable quarter of 2009.

Annual results

For the full year 2010, AutoNation reported a profit of $247 million or $1.56 per share, compared with $204 million or $1.15 per share in the prior year. Revenues for the year rose 17% to $12.5 billion from $10.7 billion in 2009.

Financial Details

AutoNation's cash and cash equivalents declined to $95.1 million as of December 31, 2010 from $173.5 million in the year-ago period. In 2010, capital expenditures increased to $81.5 million from $34.9 million in the prior year. During the year, the company repurchased 26.6 million shares of its common stock for $523.7 million, reflecting an average purchase price of $19.69.

AutoNation, a Zacks#3 Rank (Hold) stock, is the largest automotive retailer in the U.S. and is about twice the size of its nearest competitor. It sells 33 different brands of new vehicles, the core brands being Ford, General Motors, Chrysler, Toyota, Nissan, Honda and BMW. These core brands represent more than 90% of the company sales.

 
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