Tags: AutoNation | sales | recovery | AN

AutoNation Revs On Car Sales Recovery

By    |   Tuesday, 21 February 2012 10:31 AM

As the nation's largest new car retailer, AutoNation (AN) set record results in 2011 and is positioned to rev up profits on a recovery of new cars sold in the United States.

AutoNation owns 250 car dealerships in 15 states. The company divides its car brand sales into domestic, import and premium luxury manufacturers. Approximately half of sales are from imports.

The sale of new cars is the largest source of revenue. Other sources of revenue are used car sales, parts and service, and finance and insurance. The largest amount of operating profit — sales minus cost of sales — comes from parts and service, followed by new car sales.

For 2011, AutoNation reported revenue of $7.5 billion, up 10 percent from $6.67 billion in 2010. Net income for the year was a company record of $1.94 per share, up 24 percent from the $1.56 earned in 2010.

Fourth quarter earnings of 51 cents per share also marked an all time company record for quarterly earnings. The Wall Street 2012 consensus earnings estimate is $2.21 per share.

Car sales rebounding

New car sales in the United States ranged from 16.1 million to 17.3 million per year during the eight years of 2000 through 2007. By 2009, new car sales had fallen to just 10.4 million.

Sales recovered to 11.6 million in 2010 and 12.6 million in 2011. Automotive industry experts predict sales will climb back to 16 million over the next several years. This trend, if it happens, will result in significant revenue and profit growth for AutoNation.

The AutoNation one-year stock chart looks like a rugged mountain range. The rise and fall can be tied to the industry and AutoNation practices of reporting car sales every month. A disappointing month and the share price drops. A good month and it goes up. Investors should be aware of this pattern when buying or selling shares.

AutoNation is not a favored by the Wall Street analysts following of the stock. Of 13 ratings, 10 are hold ratings and the remaining three analysts rate AN a sell.

The company reports next on April 26.

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Tuesday, 21 February 2012 10:31 AM
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