On Feb 7, we upgraded
) to Outperform based on its optimal brand and market mix, which
is driving the sales of new vehicles. Further, the upgrade was
based on the company's continued focus on dealership network
expansion by investing in existing stores and service centers.
Why the Upgrade?
AutoNation posted a 31.4% increase in earnings per share to 67
cents in the fourth quarter of 2012 from 51 cents in the
corresponding quarter last year. With this, profits surpassed the
Zacks Consensus Estimate by a couple of cents.
Revenues for the quarter increased 13.5% to $4.2 billion. The
growth in revenues was driven by strong performance of all the
businesses. Revenues were ahead of the Zacks Consensus Estimate
of $4.0 billion.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for 2013 increased 1.4% to $2.91 per share.
Meanwhile, the Zacks Consensus Estimate for 2014 increased 2.5%
to $3.26 per share.
AutoNation is set to witness higher margins due to its product
mix, focus on selling parts and services, such as insurance,
finance and aftermarket product services. In addition, the
company's new vehicle sales have been improving at a fast pace.
In the fourth quarter of 2012, the company's retail new vehicle
unit sales increased 17%.
Other Stocks to Consider
Rush Enterprises, Inc.
Asbury Automotive Group, Inc.
Group 1 Automotive Inc.
) are performing well in the same industry where AutoNation
operates. Rush Enterprises and Asbury Automotive are Zacks Rank
#1 (Strong Buy) stocks while Group 1 carries a Zacks Rank #2
ASBURY AUTO GRP (ABG): Free Stock Analysis
AUTONATION INC (AN): Free Stock Analysis
GROUP 1 AUTO (GPI): Free Stock Analysis
RUSH ENTRPRS-A (RUSHA): Free Stock Analysis
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