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Category: Stock Market and Autonation
Date: 12 May 2020 Stock Price: $39.39 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Autonation, America's largest and most recognized automotive retailer operating in over 325 locations
The COVID-19 pandemic has adversely impacted and is expected to continue to adversely impact, AutoNation's operations " |
About Autonation
AutoNation, America's largest and most recognized automotive retailer, is transforming the automotive industry through its bold leadership, innovation, and comprehensive brand extensions. As of March 31, 2020, AutoNation owned and operated over 325 locations from coast to coast. AutoNation has sold over 12 million vehicles, the first automotive retailer to reach this milestone. AutoNation's success is driven by a commitment to delivering a peerless experience through customer-focused sales and service processes. Since 2013, AutoNation has raised over $22 million to drive out cancer, create awareness, and support critical research through its DRIVE PINK initiative, which was officially branded in 2015.
Overview of Autonation 1st quarter 2020 earnings report
The data below refers to the most recent quarter unless specified otherwise:
- Revenues: $4.667 billion (down from $4.981 billion for the same quarter of the previous year)
- Revenue decreased by -6.3% over the last 12 months
- Operating expenses : $3.853 billion (down from $4.132 billion for the same quarter of the previous year)
- Operating expenses decreased by -6.7% over the last 12 months
- Some margin gain for Autonation with their revenues declining at a slower rate than their operating expenses
- Net loss: -$232.3 million (down from $92 million for the same quarter of the previous year)
- Diluted loss per share: -$2.58 (down from earnings of $1.01 for the same quarter of the previous year)
- PE ratio of Autonation : Since the group is currently making a loss we cannot calculate a PE ratio
- Diluted weighted-average shares outstanding: 87.2 million (down from 89.29 million for the same quarter of the previous year)
- Cash and cash equivalents: $411 million
- Cash and cash equivalents per share: $4.71
- Cash and cash equivalents makes up 11.96% of Autonation market capital
- Inventories of Autonation: $3.677 billion (down from $3.711 billion for the same quarter of the previous year)
- Inventories of Autonation declined by -2.8% over the last 12 months
- Stockholders equity in Autonation: $2.846 billion
- Stockholders equity per share: $32.64
- So Autonation is trading at 1.1 times its stockholders equity per share, which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 3.7 times. Read more about the S&P500 here
Autonation's management commentary on their 1st quarter 2020 earnings report
FORT LAUDERDALE, Fla., May 11, 2020 /PRNewswire/ -- AutoNation, Inc. (NYSE: AN), America's largest and most recognized automotive retailer, today reported first quarter 2020 GAAP net loss from continuing operations of $232 million, or $2.58 per share, compared to net income from continuing operations of $92 million, or $1.02 per share, in the prior year period. First quarter 2020 adjusted net income from continuing operations was $82 million, or $0.91 per share, compared to adjusted net income from continuing operations of $86 million, or $0.95 per share, in the prior year period.
Operational Summary
The COVID-19 pandemic and related shelter in place orders enacted in the second half of March 2020 caused significant disruption to the Company's first quarter 2020 results. Same store first quarter 2020 revenue was $4.7 billion, a decrease of 5% compared to the same period a year ago. Same store first quarter 2020 gross profit totaled $812 million, a decrease of 3% compared to the year-ago period. Same store total variable gross profit was $423 million, a decrease of 5% compared to the year-ago period. Same store Customer Financial Services gross profit per vehicle retailed was an all-time record of $2,089, up $179 or 9% compared to the year-ago period. Same store Customer Care gross profit was $389 million, a decrease of 1 percent compared to the year-ago period.
Operational Summary
The COVID-19 pandemic and related shelter in place orders enacted in the second half of March 2020 caused significant disruption to the Company's first quarter 2020 results. Same store first quarter 2020 revenue was $4.7 billion, a decrease of 5% compared to the same period a year ago. Same store first quarter 2020 gross profit totaled $812 million, a decrease of 3% compared to the year-ago period. Same store total variable gross profit was $423 million, a decrease of 5% compared to the year-ago period. Same store Customer Financial Services gross profit per vehicle retailed was an all-time record of $2,089, up $179 or 9% compared to the year-ago period. Same store Customer Care gross profit was $389 million, a decrease of 1 percent compared to the year-ago period.
Coronavirus Update
The COVID-19 pandemic has adversely impacted and is expected to continue to adversely impact, AutoNation's operations. As of early April 2020, states from which we derive approximately 95% of our total revenue were under extensive "shelter in place" or "stay at home" orders from federal, state, and local governments, which significantly restricted our business operations, in particular our sales activities.
The health and safety of AutoNation's Customers and Associates is our top priority. AutoNation stores are cleaned and sanitized multiple times a day, including sanitizing high touch areas such as keyboards, telephones, and guest common areas. The company has implemented social distancing best practices within the workplace and in all Associate and Customer interactions.
In April 2020, the Company announced various actions taken to attempt to mitigate the financial impact of COVID-19 including placing employees on unpaid leave, implementing temporary base pay reductions for our executive officers and associates, freezing corporate new hiring, reducing advertising spending, reducing discretionary spending, postponing capital expenditures, and reducing our Board of Directors' fees.
AutoNation experienced strengthening sales in April, with same store New and Used retail unit sales down 19% during the final 10 days compared to down 52% during the first 10 days, resulting in the full month down 37%.(1) As of May 8, 2020, states from which we derive approximately 51% of our total revenue were largely still under "shelter in place" or "stay at home" orders.
Balance Sheet and Liquidity
Under the amended and restated credit agreement, the Company has a $1.8 billion revolving credit facility that matures on March 26, 2025. As of May 8, 2020, the Company had in excess of $1.4 billion of liquidity, including over $750 million of cash and approximately $650 million of availability under our revolving credit facility. The non-cash impairment charges did not have a negative impact on any covenants within the credit facility.
Share Repurchase
As a result of the impact of "shelter in place" and similar government mandated restrictions, we halted our share repurchase program during the first quarter. Prior to this, AutoNation repurchased 2.5 million shares of common stock for an aggregate purchase price of $80 million during the first quarter of 2020. As of May 8, 2020, AutoNation had approximately $139 million remaining Board authorization for share repurchase and 87 million shares outstanding.
The COVID-19 pandemic has adversely impacted and is expected to continue to adversely impact, AutoNation's operations. As of early April 2020, states from which we derive approximately 95% of our total revenue were under extensive "shelter in place" or "stay at home" orders from federal, state, and local governments, which significantly restricted our business operations, in particular our sales activities.
The health and safety of AutoNation's Customers and Associates is our top priority. AutoNation stores are cleaned and sanitized multiple times a day, including sanitizing high touch areas such as keyboards, telephones, and guest common areas. The company has implemented social distancing best practices within the workplace and in all Associate and Customer interactions.
In April 2020, the Company announced various actions taken to attempt to mitigate the financial impact of COVID-19 including placing employees on unpaid leave, implementing temporary base pay reductions for our executive officers and associates, freezing corporate new hiring, reducing advertising spending, reducing discretionary spending, postponing capital expenditures, and reducing our Board of Directors' fees.
AutoNation experienced strengthening sales in April, with same store New and Used retail unit sales down 19% during the final 10 days compared to down 52% during the first 10 days, resulting in the full month down 37%.(1) As of May 8, 2020, states from which we derive approximately 51% of our total revenue were largely still under "shelter in place" or "stay at home" orders.
Balance Sheet and Liquidity
Under the amended and restated credit agreement, the Company has a $1.8 billion revolving credit facility that matures on March 26, 2025. As of May 8, 2020, the Company had in excess of $1.4 billion of liquidity, including over $750 million of cash and approximately $650 million of availability under our revolving credit facility. The non-cash impairment charges did not have a negative impact on any covenants within the credit facility.
Share Repurchase
As a result of the impact of "shelter in place" and similar government mandated restrictions, we halted our share repurchase program during the first quarter. Prior to this, AutoNation repurchased 2.5 million shares of common stock for an aggregate purchase price of $80 million during the first quarter of 2020. As of May 8, 2020, AutoNation had approximately $139 million remaining Board authorization for share repurchase and 87 million shares outstanding.
Autonation (NYSE: AN) stock price history
The image below, obtained from Google, shows the stock price history of Autonation (NYSE: AN) over the last 5 years. And it's not been a very good time for Autonation stockholders. 5 years ago the stock of Autonation was trading at $62.30 and its currently trading at $39.39. Thats a loss of -36.8% suffered by Autonation stockholders
Autonation stock is trading at closer to its 52 week high of $53.19 and than it is from its 52 week low of $20.59 which to us is a clear indication that the short term sentiment and momentum of Autonation stock is slightly positive at this point in time.
Autonation stock is trading at closer to its 52 week high of $53.19 and than it is from its 52 week low of $20.59 which to us is a clear indication that the short term sentiment and momentum of Autonation stock is slightly positive at this point in time.
Recent Google search trends for AN stock price
The graphic below shows the Google search trends for AN stock price over the last 12 months in the United States as obtained from Google Trends. As the graphic shows the searches for AN stock price has been increasing steadily over the last couple of months and the peak in searches over the last year actually took place in the most recent week (3-9 May)
Recent coverage of Autonation
The extract below shows recent coverage of Autonation as obtained from TheStreet.com
AutoNation (AN) came out with quarterly earnings of $0.91 per share, beating the Zacks Consensus Estimate of $0.70 per share. This compares to earnings of $1.05 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 30%. A quarter ago, it was expected that this auto retailer would post earnings of $1.15 per share when it actually produced earnings of $1.31, delivering a surprise of 13.91%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. AutoNation, which belongs to the Zacks Automotive - Retail and Whole Sales industry, posted revenues of $4.67 billion for the quarter ended March 2020, surpassing the Zacks Consensus Estimate by 2.47%. This compares to year-ago revenues of $4.98 billion. The company has topped consensus revenue estimates three times over the last four quarters.
Read the full article here
AutoNation (AN) came out with quarterly earnings of $0.91 per share, beating the Zacks Consensus Estimate of $0.70 per share. This compares to earnings of $1.05 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 30%. A quarter ago, it was expected that this auto retailer would post earnings of $1.15 per share when it actually produced earnings of $1.31, delivering a surprise of 13.91%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. AutoNation, which belongs to the Zacks Automotive - Retail and Whole Sales industry, posted revenues of $4.67 billion for the quarter ended March 2020, surpassing the Zacks Consensus Estimate by 2.47%. This compares to year-ago revenues of $4.98 billion. The company has topped consensus revenue estimates three times over the last four quarters.
Read the full article here
Autonation (NYSE: AN) latest stock valuation
So based on Autonation's 1st quarter 2020 earnings report what do we value Autonation stock at? Based on the fact that Autonation is currently loss making we value the group at their stockholders equity per share. Thus we value the stock of Autonation at $32.64 a stock
We therefore believe that the stock of Autonation is fully valued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $32.64. A good entry price into Autonation stock would therefore be at $29.40 or below.
We expect the stock of Autonation to trade in a narrow range around its current price in coming weeks and months.
We therefore believe that the stock of Autonation is fully valued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $32.64. A good entry price into Autonation stock would therefore be at $29.40 or below.
We expect the stock of Autonation to trade in a narrow range around its current price in coming weeks and months.
Next earnings release of Autonation
It is expected that Autonation will release their 2nd quarter 2020 earnings release in early August 2020