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AutoNation Inc

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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation

AutoNation Earnings: Buybacks Continue to Drive EPS Growth but Overall Performance Still Solid

AutoNation reported good first-quarter results given U.S. macroeconomic uncertainty and continues to significantly boost its EPS via share repurchases. Diluted EPS of $6.07 rose 5% year over year and beat the Refinitiv consensus of $5.74, however, we calculate EPS would have declined 29.1% absent buybacks. AutoNation has long been an aggressive repurchaser of its stock, having reduced the diluted share count by 90% since year-end 1998 by our calculation. First-quarter buybacks totaled 2.4 million shares for $305 million, or $127.08 per share, which we like since it’s below our fair value estimate. Buyback authorization is about $875 million, and we don’t expect the board to hesitate to increase this amount when likely needed later this year. Management remains well disciplined by balancing repurchases while maintaining a healthy balance sheet and investing in omnichannel capability and the AutoNation USA standalone used stores. The USA stores opened two more locations in the quarter (Albuquerque and Austin) to bring its store count to 15.

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