It has been about a month since the last earnings report for AutoNation (AN Quick QuoteAN - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is AutoNation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AutoNation Q2 Earnings Miss Expectations

AutoNation reported second-quarter adjusted earnings of $3.99 per share, which decreased 37% year over year and missed the Zacks Consensus Estimate of $4.31.

In the second quarter, revenues amounted to $6.48 billion, which missed the Zacks Consensus Estimate of $6.76 billion and declined from $6.89 billion reported in the second quarter of 2023.

Key Takeaways

In the reported quarter, new vehicle revenues were down 4.8% year over year to $3.12 billion and missed our estimate of $3.14 billion due to lower-than-expected average selling price (ASP). New vehicle retail units sold totaled 61,268 units (down 1.9% year over year), topping our projection of 60,482 units. The ASP per new vehicle unit retailed was $50,965 (down 3% year over year), missing our estimate of $52,063. Gross profit from the segment came in at $190.4 million, declining 33.8% year over year but topping our estimate of $175 million.

Retail used-vehicle revenues contracted 10.6% from the year-ago quarter’s figure to $1.74 billion and missed our projection of $1.94 billion due to lower-than-expected sales volume and ASP. Used vehicle retail units sold totaled 65,504 units (down 4.8% year over year), missing our projection of 68,900 units. ASP per used vehicle unit retailed came in at $26,617 (down 6% year over year) and lagged our projection of $28,196. Gross profit from the segment came in at $107.3 million, which fell 16.6% and missed our projection of $125 million.

Revenues from wholesale used vehicles were up 20.7% to $167.6 million and topped our estimate of $138 million. Gross profit declined 26.8% to $4.1 million and lagged our estimate of $5.6 million.

Net revenues in the finance and insurance business amounted to $324 million, which decreased 12.3% from the year-ago quarter and missed our projection of $375.5 million. Gross profit was $324 million, which decreased 12.3% and missed our estimate of $375.5 million.

Revenues from the parts and service business fell 2.5% to $1.12 billion and missed our estimate of $1.25 billion. Gross profit from this segment came in at $536.6 million, which dipped 1.1% year over year and missed our estimate of $591.2 million.

Segmental Details

Revenues from the Domestic segment declined 11.1% year over year to $1.74 billion and missed our projection of $1.89 billion. The segment’s income plunged 56.6% to $50.3 million, missing our estimate of $82 million.

Revenues from the Import segment rose 1.1% from the prior-year quarter to $2 billion and missed our forecast of $2.07 billion. The segment’s income contracted 37.5% to $108.2 million and missed our model estimate of $134.1 million.  

The Premium Luxury segment sales fell 8.5% to $2.4 billion, missing our projection of $2.58 billion. The segmental income declined 35.9% year over year to $141.9 million in the reported quarter and missed our estimate of $174.6 million.

Financial Tidbits

AutoNation’s cash and cash equivalents were $85.9 million as of Jun 30, 2024. The company’s liquidity was $1.6 billion, including $86 million in cash and nearly $1.5 billion available under its revolving credit facility.

The firm’s inventory was valued at $3.6 billion. At the end of the second quarter, non-vehicle debt was $4.01 billion. Capital expenditure in the quarter was $88 million.

During the second quarter of 2023, AutoNation repurchased 2 million shares of common stock for an aggregate purchase price of $311 million. Since the beginning of the year through Jul 29, the company had bought back 2.2 million shares for $350 million. As of Jul 29, it had $971 million remaining under its share repurchase program.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, AutoNation has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, AutoNation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

AutoNation is part of the Zacks Automotive - Retail and Whole Sales industry. Over the past month, Group 1 Automotive (GPI Quick QuoteGPI - Free Report) , a stock from the same industry, has gained 4.8%. The company reported its results for the quarter ended June 2024 more than a month ago.

Group 1 Automotive reported revenues of $4.7 billion in the last reported quarter, representing a year-over-year change of +3%. EPS of $9.80 for the same period compares with $11.73 a year ago.

For the current quarter, Group 1 Automotive is expected to post earnings of $10.34 per share, indicating a change of -14.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.9% over the last 30 days.

Group 1 Automotive has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.