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AutoNation Inc AN

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AutoNation's Third Quarter Is Another Record as Robust Share Buybacks Continue

Analyst Note

| David Whiston, CFA, CPA, CFE |

AutoNation’s third-quarter earnings were the sixth straight record quarter for the company, as low inventory from the chip shortage continues to yield excellent pricing power for dealers. Diluted EPS from continuing operations of $5.12 beat the Refinitiv consensus of $4.20 and was more than double adjusted EPS a year ago. The company also announced its second acquisition this year, Priority 1 Automotive Group, which is expected to close before year-end and bring about $420 million of annualized revenue. Priority 1 is a Maryland-based firm with mostly premium brand franchises such as Acura, BMW, and Audi primarily near Baltimore. AutoNation also said it bought back nearly 11% of outstanding shares in the quarter and has repurchased 27% of shares in the past 12 months. It also announced a new $1 billion buyback program, bringing total authorization to about $1.3 billion. We are raising our fair value estimate to $109 from $98 on time value of money, a lower share count, and higher 2021 and 2022 earnings than previously modeled due to how 2021 is tracking and the Priority 1 deal.

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Company Profile

Business Description

AutoNation is the largest automotive dealer in the United States, with 2020 revenue of $20.4 billion and over 230 dealerships and over 300 locations, including collison centers. The firm also has eight AutoNation USA used-vehicle stores, four auction sites, and over 50 collision centers all across 16 states primarily in Sunbelt metropolitan areas. New-vehicle sales account for about 51% of revenue; the company also sells used vehicles, parts, and repair services as well as auto financing. The company (formerly Republic Industries) spun off its waste management unit (Republic Services) in 1999 and its car rental businesses (ANC Rental) in 2000. Wayne Huizenga founded the company in the 1990s to bring the rollup acquisition strategy to auto retailing, which has proved to be a smart move.

Contact
200 South West 1st Avenue
Fort Lauderdale, FL, 33301
T +1 954 769-6000
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 21,600

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