AutoNation Earnings: Buybacks Help EPS, but Results Still Look Solid

AutoNation reported solid third-quarter results that were typical of the dealer sector, and we see no reason to change our fair value estimate. Diluted EPS of $5.54 fell about 8% year over year but beat the $5.49 Refinitiv consensus. $200 million of buybacks in the quarter helped, and we calculate that EPS using second quarter's share count would have been $5.38. We expect more repurchases in the fourth quarter, but management did say acquisitions are becoming a more attractive opportunity, though sellers' asking prices still need to come down. The United Auto Workers strike did not have much impact on the results beyond some inventory buildup, but we expect fourth-quarter damage should GM and Stellantis not soon reach a tentative deal as Ford did on Oct. 25.