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AutoNation Inc AN

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Morningstar’s Analysis

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Cost Cuts Enable AutoNation to Post an All-Time Record Quarter

Analyst Note

| David Whiston, CFA, CPA, CFE |

AutoNation’s second-quarter results saw the firm post its best ever quarterly adjusted diluted EPS from continuing operations, up 18% year over year to $1.41 and far ahead of the Refinitiv consensus of $0.37. Much like dealer Lithia Motors that reported July 22, AutoNation achieved its good results via cost-cutting from personnel and advertising rather than higher demand. The firm also answered the long standing question of the fate of the firm’s five AutoNation USA standalone used vehicle stores. Twenty new stores will be opened over the next three years at a cost of about $10 million-$11 million per store. More details will be given at the third-quarter earnings call, but we are raising our fair value estimate by $13 to $62. The change is primarily from modeling the new USA stores and better 2020-21 results based on how 2020 is faring but also due to time value of money and a lower share count.

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Company Profile

Business Description

AutoNation is the largest automotive dealer in the United States, with 2019 revenue of $21.3 billion and over 230 dealerships. The firm also has five AutoNation USA used-vehicle stores and 81 collision centers all across 16 states primarily in Sunbelt metropolitan areas. New-vehicle sales account for about 52% 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.

200 South West 1st Avenue
Fort Lauderdale, FL, 33301
T +1 954 769-6000
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 25,000