IBD Stock Analysis
- AutoNation stock cleared a 107.07 buy point after strong earnings.
- Shares gapped up above their 50-day average despite the market rout.
- The relative strength line is rising toward a recent high.
Industry Group Ranking
* Not real-time data. All data shown was captured at
12:04PM EDT on
Fort Lauderdale, Fla.-based AutoNation is America’s largest automotive retailer, with more than 300 owned and operated locations nationwide. The company on Monday posted second-quarter EPS of $4.83 cents, a 243% increase from the year-ago period and way above estimates for $2.81. Sales jumped 54% to $6.98 billion, beating views for $6.02 billion.
“Demand continues to outpace supply for new vehicles,” said CEO Mike Jackson in a statement. “We expect this to continue into 2022 due to consumers’ preference for personal transportation coupled with lower interest rates.”
AutoNation’s gross profit per new vehicle surged 89% to $4,157 in Q2, while the gross profit per used vehicle climbed 24% to $2,240. Expenses as a percentage of gross profit was 56.5%, an improvement of 1,170 basis points compared with the prior year as more shoppers completed their purchases online.
Sales of new cars spiked 42% in Q2, while used vehicles grew 37%.
More than half of AutoNation’s total revenue in 2020 came from new vehicle sales. Used vehicles accounted for 28% of revenue, while parts and services made up 16%. The balance came mostly from its finance and insurance segment.
“While new and used vehicle sales account for the majority of sales, 70% of the company’s gross profit was generated from parts and service, and finance and insurance in 2020,” CFRA Research analyst Garrett Nelson said in a note today.
Shares climbed 5.6% to 108.32 on the stock market today, breaking out from a 107.07 buy point from a nine-week consolidation in heavy volume, according to MarketSmith chart analysis. AN stock cleared the entry intraday on July 14, but volume was low and shares closed below the buy point.
AutoNation also gapped above their 50-day average and set an all-time intraday high of 109.22.
The relative strength line is climbing toward recent highs. AN stock’s RS Rating is 91 out of a possible 99. Its EPS Rating is 90. With a Composite Rating of 93, AutoNation ranks No. 4 in IBD’s retail/wholesale automobile industry group.
AutoNation today announced that the board of directors authorized the repurchase of up to $1 billion of AN stock.
Among other auto retailer stocks, Carvana (CVNA) fell 2% to 307.16. CNVA stock is also nearing a 323.49 buy point from a long consolidation.
The chip shortage affecting the auto industry as a whole has kept vehicle inventories low. AutoNation had 14 days of supply for new vehicles in the quarter vs. 49 a year earlier.
Wall Street views CEO Jackson’s return to the helm at AutoNation in July 2020 as a positive, especially amid turbulent times. CFRA’s Nelson sees him as a “well-regarded veteran.” Jackson’s contract runs through April 2022, a period in which the company plans to grow its retail footprint.
On Monday, AutoNation said it planned to open four new stores in the U.S. in the second half of the year and 12 new stores in 2022.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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