AutoNation Inc.
(
AN
) posted a solid 35% jump in profits for the second quarter of
2012, which helped this automotive retailer reach its 52-week high
of $43.72. With a stronger environment for new vehicle sales and a
long-term earnings growth projection of 16.5%, this Zacks #1 Rank
(Strong Buy) offers a lucrative opportunity for growth-seeking
investors.
Impressive Quarter
On July 19, AutoNation reported adjusted earnings per share of 66
cents for the second quarter of 2012, outpacing the year-ago level
of 49 cents by 35% as well as the Zacks Consensus Estimate of 60
cents by 10%.
Revenues grew 17% to $3.9 billion driven by a growth in new vehicle
unit sales of 29%, which significantly outperformed the industry
growth of 15%. On a same-store basis, new vehicle sales went up 29%
to 66,828 units during the quarter.
The selling rate in the quarter rose 16% to 14.1 million units.
Management expects the retail sales environment to continue to
improve, driven by accelerated product launches, replacement demand
and robust consumer credit. It anticipates that industry new
vehicle sales will reach mid-14 million units by the end of 2012.
Earnings Estimates Moving Higher
AutoNation saw strong upward revisions for both fiscal 2012 and
2013 over the last 60 days. For 2012, the Zacks Consensus Estimate
advanced by 6.0% to $2.48. For 2013, the Zacks Consensus Estimate
went up 6.1% to $2.80. The outlooks for 2012 and 2013 reflect
double-digit annualized growth of 27.8% and 12.9%, respectively.
Valuation is Expensive but Justified
Valuation of AutoNation looks expensive, which is reflected in its
PEG ratio of 1.03. The stock is currently trading at a forward P/E
of 17.0x, a premium of 44.0% to the peer group average of 11.8x.
The price-to-book of 3.4x is at a premium of 79.0% compared to the
peer group average of 1.9x.
However, the company has a 1-year ROE of 16.9% versus the peer
group average of 16.6%. The expensive valuation is justified given
the company's strong growth in each of its business areas and
continuous improvement in the retail sales environment.
Chart Looks Stable
The stock has been outperforming its 50-day and 200-day moving
averages since July.
Incorporated in 1991 and headquartered in Fort Lauderdale, Florida,
AutoNation is the largest automotive retailer in the U.S. As of
June 30, 2012, the company owned and operated 260 new vehicle
franchises and 215 stores located in major metropolitan markets in
15 states. The $5.1 billion company sells 32 different brands of
new vehicles, representing automakers such as Ford Motor Co. (
F
), General Motors Company (
GM
) and Toyota Motor Corp. (
TM
), among others.
AUTONATION INC (AN): Free Stock Analysis Report
AUTONATION INC (AN): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research