AutoNation shares rise 5.9% despite Q3 profit miss

Shares rose 5.9% in regular trading as of 3:59 p.m. ET, to $179.36 from a regular-session close of $169.34.

AutoNation (AN) said on Oct. 30 that third-quarter adjusted earnings per share were $5.11, below the $5.23 consensus estimate compiled by Finnhub.

Revenue was $7.01 billion, also below the $7.18 billion estimate compiled by Finnhub, and relatively flat from $7.04 billion a year earlier.

Here's how the company did:

• Adjusted EPS: $5.11 vs. $5.01 a year earlier, $5.23 expected, according to Finnhub
• Diluted EPS, GAAP: $4.87 vs. $5.65 a year earlier
• Revenue: $7.01 billion vs. $7.04 billion a year earlier, $7.18 billion expected, according to Finnhub

Net income was $162.3 million, down from $215.1 million a year earlier.

Operating income fell to $314.6 million from $372.4 million. Gross profit was $1.21 billion, down from $1.24 billion.

AutoNation sells new and used vehicles through a nationwide network of dealerships, and also offers customer financing, parts and maintenance.

“Our team delivered another solid quarter, growing adjusted EPS for the seventh consecutive quarter,” said Chief Executive Officer Mike Manley.

Manley added: “The current environment strongly favors allocating capital toward share repurchases and as such we have secured Board authorization for an additional $1 billion in share repurchases.”

Segment results

Domestic revenue was $1.81 billion, down 7.1% from a year earlier.

Import revenue rose 3.6% to $2.25 billion, and premium luxury revenue rose 2.8% to $2.63 billion.

Segment income fell in all three franchised groups. Domestic fell to $65.5 million from $81.3 million, import to $115.3 million from $123.7 million, and premium luxury to $150.6 million from $160.9 million.

AutoNation Finance income rose to $15.4 million from $1.5 million a year earlier.

Parts and service revenue rose 5.2% to $1.29 billion, and its gross profit rose 3.3% to $616.6 million.

Costs and charges

Self-insurance related losses of $8.7 million, primarily from hail storms and other natural catastrophes, were excluded from adjusted results.

Customer journey transformation costs of $1.9 million, which are third-party professional fees, were also excluded.

Selling, general and administrative expenses were $849.1 million, down from $850.1 million, or 70.3% of gross profit, up from 68.6%.

Cash and capital returns

Adjusted free cash flow was $739.0 million for the first nine months, or 141% of adjusted net income. Cash used in operating activities was $160.4 million over the same period.

AutoNation repurchased 3.1 million shares for $620 million in the first nine months, and 3.4 million shares for $668 million through Oct. 28.

In October, its board authorized up to an additional $1.0 billion of repurchases, and $1.4 billion remained available as of Oct. 28.

Common shares outstanding fell to 32.3 million from 36.9 million.

In September, AutoNation amended its unsecured credit agreement to raise the revolving borrowing capacity to $2.0 billion and extend maturity to Sept. 14, 2031. Liquidity was $1.5 billion as of Sept. 30, and the covenant leverage ratio was 2.7X.