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AutoNation Inc AN

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AutoNation's First Quarter Is Another Record

Analyst Note

| David Whiston, CFA, CPA, CFE |

AutoNation again reported record quarterly results, with adjusted diluted EPS from continuing operations of $2.79 beating the Refinitiv consensus of $1.88. We are raising our fair value estimate to $85 from $78 as a result of time value of money and higher used-vehicle revenue due to accelerating the expansion of AutoNation USA stand-alone used-vehicle stores. The original store opening timeline was for over 100 USA stores by 2030 and 55 by the end of 2025 but is now over 130 by the end of 2026. This aggressive acceleration reflects management’s increased confidence in its custom-made data tools invested in over the past roughly five years to facilitate ample procurement of used vehicles primarily from consumers instead of from more expensive auctions. We think this timeline can happen because AutoNation has the deep financial pockets and cash-flow-generating ability to fund this growth, plus the used-vehicle sector is highly fragmented, with the largest players having single-digit share of the U.S. market. The company also made a large acquisition announcement of 11 stores and a collision center from the Peacock Automotive Group in the southeastern U.S., representing $380 million of annual revenue.

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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 about 230 dealerships. The firm also has five AutoNation USA used-vehicle stores, four auction sites, and 74 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.

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