Thursday, automotive retailer AutoNation Inc. (AN) reported a profit for the third quarter, absent hefty impairment charges incurred in the last year quarter. Earnings from continuing operations came in ahead of Street view by a penny, aided by the U.S. government's Cash for Clunkers stimulus program. Meanwhile, revenues declined from last year, hurt primarily by lower vehicle sales in an environment where industry new vehicle sales remain at depression levels.
The Fort Lauderdale, Florida-based company posted net income of $65 million or $0.36 per share for the third quarter, compared to a loss of $1.413 billion or $7.99 per share in the same quarter last year.
Excluding items affecting comparability, net income from continuing operations rose to $64.8 million or $0.36 per share from $44.1 million or $0.25 per share in the year-ago quarter. On average, nine analysts polled by Thomson Reuters expected the company to earn $0.35 per share for the quarter. Analysts' estimates typically exclude special items.
In the year-ago quarter, AutoNation recorded a non-cash goodwill impairment charge of $1.610 billion and franchise rights impairment of $127.4 million.
In the preceding second quarter of fiscal 2009, AutoNation recorded net income of $36.7 million or $0.21 per share, down from $51.8 million or $0.29 per share in the prior-year quarter. Adjusted income from continuing operations totaled $51.1 million or $0.29 per share, compared to $58.6 million or $0.33 per share in the year 2008.
For the quarter under review, revenues declined to $2.916 billion from $3.359 billion in the comparable quarter last year. Revenues fell short of analysts estimate of $3.13 billion. In the prior quarter, total revenues amounted to $2.61 billion, down from $3.66 billion a year ago.
Commenting on the third quarter, Mike Jackson, chairman and chief executive officer said, "AutoNation delivered solid profitability driven by margin recovery, cost reduction, lower interest expenses a disciplined operating model and inventory management."
Jackson said the third quarter profitability improved from third quarter 2008 despite substantially lower new vehicle industry volume compared to last year. Cash for Clunkers stimulus program aided AutoNation's third quarter results by an estimated $0.07 per share.
AutoNation's third quarter revenue from new vehicle sales was down at $1.628 billion compared to $1.891 billion a year ago, while used vehicle sales slipped to $642.2 million from $768.4 million last year. Parts and services generated revenues of $537.9 million, down from $570.9 million a year ago.
Segment wise, Domestic segment generated revenues of $922.4 million, down 12.9% from $1.059 billion a year ago. The segment's income was $34 million compared to $25 million year-ago. Domestic retail new vehicle unit sales declined 11% to 15,553 from 17,465 units last year.
Import segment recorded revenues of $1.194 billion, down 12.9% from $1.371 billion last year and income of $63 million compared to $52 million a year ago. Import retail new vehicle unit sales declined 12% to 30,959 from 35,067 units in the previous year.
Premium Luxury segment's revenue was $775.3 million, a 13.9% decline from $900 million in the prior year. The segment had income of $44 million compared to $43 million last year. Premium Luxury retail new vehicle unit sales declined 19% to 8,327 from 10,302 units last year.
Year-to-date, AutoNation's net income was $136.3 million or $0.76 per share, compared to a net loss of $1.31 billion or $7.35 per share in the corresponding period last year. Adjusted net income was $154.8 million or $0.87 per share, down from $157.5 million or $0.88 per share in the previous year. Total revenues dipped 26% to $7.943 billion from $10.779 billion last year.
Additionally, during the quarter, AutoNation's Board of Directors approved a 65% increase in capital expenditures to $150 million for 2010. The Board also authorized an additional $250 million for the repurchase of its common stock. The company repurchased 3.7 million shares of common stock in the third quarter for an aggregate purchase price of $65.8 million at an average purchase price per share of $17.81.
AutoNation also recently announced the acquisition of Honda and Acura dealerships in its AppleWay market in Spokane, Washington, which the company expects to complete before the end of the year.
Looking ahead, Jackson said, "We expect that the automotive retail market will remain challenging throughout the remainder of 2009 with a gradual recovery beginning in 2010."
Among peers, Group 1 Automotive Inc. (GPI) on October 27 said it turned to a profit in the third quarter from a loss in the year-ago period on lower asset impairments, despite a decline in revenue. Group 1 reported net income from continuing operations of $18.3 million or $0.78 per share, compared to a loss of $21.81 million or $0.96 per share. The company's total revenues declined 13.1% to $1.24 billion from $1.43 billion in the year-ago period due to lower sales of new vehicles, used vehicles, parts and services.
Another peer Sonic Automotive Inc. (SAH) on October 27 reported a swing to profit for the third quarter from a loss in the previous year on lower expenses and the absence of impairment charges incurred in the year ago quarter. Income from continuing operations for the quarter were $18.48 million or $0.22 per share, compared to a loss of $15.07 million or $0.38 per share a year ago. Total revenues for the quarter were $1.52 billion compared to $1.62 billion last year.
Bloomfield Hills, Michigan-based Penske Automotive Group Inc. (PAG) is expected to report third quarter results on October 30. Analysts estimate earnings of $0.28 per share on revenues of $2.56 billion for the quarter.
AN is trading at $17.57, down $0.50 or 2.76%, on a volume of about 4.3 million shares. For the past 52-week period, the stock traded in a range of $5.13 - $21.60 on a 3-month volume of about 3.11 million shares.
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