AutoNation Inc. (AN): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
AutoNation posted a 20% rise in earnings per share to $0.90 in the third quarter of 2014, beating the Zacks Consensus Estimate of $0.86. Revenues increased 9.8% to $4.9 billion, surpassing the Zacks Consensus Estimate of $4.8 billion. The uptrend can be attributed to strong performances in the new vehicles, parts and service, used vehicles, and finance and insurance business sectors. In 2015, industry new vehicle sales are expected to be above 17 million units. With the improvement in market dynamics, the company's optimal brand and market mix should boost new vehicle sales. Meanwhile, AutoNation's efforts to expand its dealer network should help it outperform peers. However, rising interest rates pose a threat. Thus, we are reiterating our Neutral recommendation on the stock.

Overview:

AutoNation, Inc. (AN) is the largest automotive retailer in the U.S. and is about twice the size of its nearest competitor. As of Nov 4, 2014, the company owned and operated about 277 new vehicle franchises and 229 stores that sell in major metropolitan markets of 15 U.S. states of the Sunbelt region. The company offers 34 different brands of vehicles, the core ones being Ford, General Motors, Chrysler, Toyota, Nissan, Honda, Volkswagen, Mercedes-Benz and BMW. These brands represented 95% of the new vehicle sales in the first nine months of 2014.

AutoNation also offers vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products and other aftermarket products. It also arranges financing for vehicle purchases through third-party sources.

Management divided AutoNation's business into three operating segments Domestic (accounted for about 33.7% of the company's revenues in the first nine months of 2014), Import (36%) and Premium Luxury (29.6%). The Domestic segment includes stores selling vehicles manufactured by General Motors, Ford and Chrysler whereas the Import segment comprises stores selling vehicles manufactured by Toyota, Honda, Hyundai and Nissan. The Premium Luxury segment includes stores that sell vehicles manufactured by Daimler (Mercedes Benz division), BMW, Toyota (Lexus division) and Audi.


New vehicle sales generated 56.8% of revenues, used vehicle sales accounted for 23.3%, parts and service added 14.9%, finance & insurance and other activities constituted 3.9%, and Other contributed 1.1% in the first nine months of 2014.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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As of 12/26/2014, 04:15 PM


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