AutoNation Sales Rise 5% - Analyst Blog

AutoNation Inc. (AN) sold 19,688 retail new vehicles last month, up 5% from July 2009. Sales rose marginally due to unfavorable comparison with the last year’s Cash for Clunkers program that generated significant demand for retail vehicles.

Sales of the Domestic brands, which comprise stores that sell vehicles manufactured by General Motors (MTLQQ), Ford Motor Co. (F) and Chrysler LLC, went up 13% to 5,995 units.

Sales of the Import brands, comprising stores that sell vehicles manufactured primarily by Toyota Motor Corp. (TM), Honda Motor Co. ( HMC ) and Nissan Motor Co. ( NSANY), fell a tad 1% to 10,558 units. Meanwhile, sales of the Premium Luxury brands, comprising stores that sell vehicles by Daimler AG’s (DDAIF) Mercedes Benz, BMW and Toyota Lexus, increased 12% to 3,135 units.

In July, auto sales in the U.S. rose marginally by 2.2% to 11.54 million vehicles in terms of seasonally adjusted annual rate, driven mainly by strong sales gain experienced by the U.S. automakers. Pickup trucks and luxury cars were the hottest selling vehicles during the month.

In the second quarter of 2010, AutoNation witnessed a 36% increase in profits to $62 million or 38 cents per share from $50 million or 28 cents per share in the prior-year quarter. With this, the automotive retailer has inched past the Zacks Consensus Estimate of 36 cents per share.

Revenues in the quarter escalated 19% to $3.1 billion, driven by a marked 25% improvement in the new and used vehicle revenues. It was close to the Zacks Consensus Estimate of $3 billion. Operating income increased to $125.9 million from $100.9 million a year ago.

New vehicle revenues rose 24% to $1.66 billion. This translated into revenue per vehicle of $31,956, an increase of 4% from the year-ago level. The retailer’s new vehicle sales appreciated 20% to 51,893 units. The rise in unit sales was higher than the industry sales increase by 8 percentage points. The company continues to expect industry new vehicle sales of 11.5 million units for full year 2010.

AutoNation is the largest automotive retailer in the U.S. and is about twice the size of its nearest competitor. As of June 30, 2010, the company owned and operated 249 new vehicle franchises from 204 dealerships located in major metropolitan markets in 15 states. Based on the improved results, we have recommended the shares of the company as Zacks #1 Rank (Strong Buy) in the short term (1–3 months).

 
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