AutoNation Earnings: CDK Cyberattack Affected July but We See a Good Fourth Quarter Ahead

AutoNation’s third-quarter adjusted diluted EPS of $4.02 fell 27% year over year and missed the $4.38 LSEG consensus. We don’t see the firm's growth trajectory as being in worse shape following the results, so we keep our fair value estimate. Adjusted EPS could've been in the low $4.30 range if the firm had treated as special items the $0.21 lost business impact from the CDK cyberattack affecting three weeks of July and about $0.08-$0.09 for stop-sale orders affecting many premium brands, such as BMW. Despite these headwinds, same-store new vehicle revenue and new units rose 0.1% and 2%, respectively. Total same-store revenue fell 4.4% on a 15.1% used vehicle decline and 9.9% finance and insurance decline. New vehicle profitability continues to fall from chip shortage highs while used vehicle consumers struggle with affordability, but new vehicle gross margin of 5.6% is 150 basis points above third-quarter 2019’s. Dealers run their businesses for gross profit dollars and new vehicle GPU of $2,804 was 75% above third-quarter 2019's.