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AutoNation, Inc. (AN), CarMax, Inc (KMX): A Safe Drive for Your Portfolio

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One of the biggest automotive retailers in the U.S., AutoNation, Inc. (NYSE:AN) , released its quarterly earnings earlier this month. The results were mixed as the company reported all-time high earnings but still fell short of the analysts’ estimates by the slightest of margins. However, the revenue generated by the company comprehensively beat all the expectations.

AutoNation, Inc. (NYSE:AN)

If you’re wondering what contributed toward this considerably fine growth and whether or not the company is capable of coming out of the wash in the present world of stiff competition, then continue reading.

Reason that drove success

AutoNation, Inc. (NYSE:AN)’s revenue increased 13.4% to a stunning $4.4 billion, thumping the consensus estimates of $4.3 billion. The company operates in three segments, namely domestic, import and premium luxury. All the segments performed luminously to contribute to this eye-catching growth of revenue, while elevated revenue from retailed used vehicles also supplemented the top line.

New vehicle unit sales recorded an increment of 11%, which escalated the segments revenue to $2.5 billion, an increase of 13.5% from the prior year. The same-store sales, which indicate a company’s success, also increased 9.2% to $2.4 billion.

Used vehicle sales didn’t contribute to the revenue as much as the new vehicle sales, but you can’t deny the fact that this sector’s contribution was noteworthy. As the statistics show, the sales of used vehicles generated revenue of $1.1 billion, which marks an increase of 11.5% versus the previous fiscal year.

According to me, good performance in every segment clearly shows that the company is running like a well-oiled machine. And if AutoNation, Inc. (NYSE:AN) continues what it has been doing, the company will easily surpass all the expectations.

Now, let’s have a look at the earnings. On an adjusted basis, the earnings per share increased 11% to $0.73 from continuing operations, as compared to the prior year when it was $0.66, falling shy of the analyst estimates by a mere $0.01 per share. Net income increased to $90 million from $81.5 million, a significant rise of 10.4%, which was, as I said, achievable only because of the efficient performance of all sectors.

What does AutoNation have in store?

I’m sure by now you’re interested in knowing what AutoNation, Inc. (NYSE:AN) is planning for the future. Let me tell you beforehand that the company is looking to hold the fort as the biggest automotive retailer in the U.S.A. and the tactics which are being implemented look likely to reap fruits.

Following the success of premium luxury stores, AutoNation, Inc. (NYSE:AN) has awarded Mercedes-Benz’ franchises in Atlanta, Tampa, Fla. markets. The development of these stores is on track and the organization expects a gestation period of around 15 months.

Following the acquisitions of Don Davis Toyota Scion, SanTan Honda superstore, and Hyundai of temple, AutoNation, Inc. (NYSE:AN) also completed its re-branding initiative. Although the one-time investment was high, the company is confident it will be a success. Its numerous domestic and import franchises representing various manufacturer brands is now unified and marketed under the name of AutoNation across the nation.

The board members of AutoNation, over the previous conference call, stated that the company is actively looking for more acquisitions and new store opportunities with a focus on adding new brand representation with their existing market.

According to me, the company’s ever-growing urge of making the most out of each possible opportunity will benefit its margins.

Outsmarting the peers

But as you know, nothing in the world comes easy and AutoNation will have to make the right moves, which it has been doing until now, to steer clear of its competitors.

The most competent organization that AutoNation should look out for is Asbury Automotive Group, Inc. (NYSE:ABG). This automotive retailing giant recently released its admirable quarterly results. It generated revenue of $1.3 billion, which was 16% more than the prior fiscal year. An upward trend of sales of new and used vehicles contributed to impressive financial figures.

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