Skip to Content
Stock Analyst Update

AutoNation Cleans Out Executive Ranks

We think the stock is undervalued, but it may remain cheap until more certainty comes in governance.

Mentioned:

We are not changing our  AutoNation (AN) fair value estimate after the auto dealer announced a restructuring plan and executive departures, as we do not see our investment thesis as compromised. The company seeks $50 million in cost reductions in part due to its belief that "automotive retail will be challenging in 2019." We expect U.S. auto sales will decline in 2019 though still be at healthy levels, but pricing risks and expensive store imaging rules from automakers remain. AutoNation is consolidating its operating structure to two regions--east and west--from three. The former central region president now runs the eastern region and the former eastern region president, Jim Bender, is now executive vice president of sales. COO Lance Iserman, CTO Tom Conophy, and real estate executive Donna Parlapiano have left the company, and human resources head Dennis Berger will leave Jan. 31.

It appears to us CEO Mike Jackson is cleaning house at the executive level. Given that Conophy had only been with AutoNation for a couple of years, perhaps Jackson is not pleased with current results or wants the next CEO to pick his or her own team. In September, when the company announced Jackson will step down as CEO but remain chairman, it also mentioned using an executive search firm, so Iserman may have felt he had no chance of becoming CEO and sought a change.

We think AutoNation's stock is undervalued, but it may remain cheap until more certainty comes in governance. We think it may be hard to find a good CEO who is willing to work under Jackson as well. Michael Larson of Cascade Investments had been lead independent director but resigned from the board in December after nearly nine years, saying it was a good time to transition. Given that Larson was probably leading the CEO search, we disagree with that statement unless he was not willing to conduct the search. Longtime director Rick Burdick, a law partner at Akin, Gump, Strauss, Hauer & Feld, is now lead independent director.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

David Whiston does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.