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.