Earnings estimates for this auto seller have risen by 35.7% in the past 60 days, with the June quarter EPS now expected to come in at $2.58.
AutoNation, Inc. (AN)
From Upside
AutoNation’s operating profit margin expanded to 4.8% in 2020, its highest level since 1993. In the March quarter, AutoNation pried operating profit margins wider to 5.7%, versus 3.5% in the year-ago quarter and higher than any quarter since 1997. Management attributes its higher profitability to cost discipline, improvements in its digital business, and higher vehicle prices.
With vehicle supplies limited in many parts of the country, AutoNation is not budging much on the sticker price of new cars. AutoNation has shown more willingness to negotiate on prices for used cars, which can be more easily replaced in its inventory.
Encouragingly, management says vehicle demand remains significant and sustainable, which should help protect operating profit margins in coming quarters. Analysts expect per-share profits to grow 42% in 2021 on 16% higher revenue.
AutoNation is a Best Buy.
Richard J. Moroney, CFA, Upside, upsidestocks.com, 800-233-5922, June 2021