Core Insights - AutoNation, Inc. reported first-quarter 2025 adjusted earnings of $4.68 per share, a 4% increase year over year, surpassing the Zacks Consensus Estimate of $4.35, driven by strong revenues and profits from retail new and used vehicles [1] - Total revenues for the quarter reached $6.69 billion, exceeding the Zacks Consensus Estimate of $6.57 billion and up from $6.48 billion in the first quarter of 2024 [1] Revenue Breakdown - New vehicle revenues increased by 9% year over year to $3.24 billion, exceeding the estimate of $2.83 billion, with retail units sold totaling 62,387, a 6% increase from the previous year [2] - Average selling price (ASP) for new vehicles rose by 2.9% year over year to $52,064, surpassing the estimate of $47,541 [2] - Gross profit from new vehicles was $175 million, a decline of 10.7% year over year, but above the estimate of $112.5 million [2] Used Vehicle Performance - Retail used-vehicle revenues decreased by 2.3% year over year to $1.79 billion, but exceeded the projection of $1.77 billion due to higher ASP [3] - Used vehicle retail units sold were 68,000, down 1.6% year over year, missing the projection of 69,429 units [3] - ASP for used vehicles was $26,354, down 0.7% year over year, but above the estimate of $25,562 [3] - Gross profit from used vehicles increased by 11% to $113 million, surpassing the estimate of $86.3 million [3] Wholesale and Other Segments - Revenues from wholesale used vehicles fell by 19.7% to $130.3 million, missing the estimate of $165.7 million, while gross profit rose to $11.5 million from $9.7 million, exceeding the estimate of $6.2 million [4] - Finance and insurance business net revenues were $352.5 million, a 5.3% increase year over year, beating the projection of $332.2 million [4] - Parts and service revenues contracted by 0.7% to $1.16 billion, missing the estimate of $1.3 billion, while gross profit rose by 2.1% to $567.7 million, below the estimate of $618 million [5] Segmental Performance - Domestic segment revenues declined by 2.2% year over year to $1.71 billion, exceeding the projection of $1.7 billion, with segment income down 8.2% to $69 million, but above the estimate of $60 million [5] - Import segment revenues increased by 3.4% to $2 billion, surpassing the forecast of $1.95 billion, with income contracting by 2% to $126 million, exceeding the estimate of $113 million [6] - Premium Luxury segment sales rose by 6.7% to $2.57 billion, surpassing the projection of $2.44 billion, with segment income increasing by 4.1% to $178.7 million, exceeding the estimate of $160 million [6] Financial Position - As of March 31, 2025, the company's liquidity stood at $1.6 billion, including $71 million in cash and nearly $1 billion available under its revolving credit facility [7] - Inventory was valued at $3.23 billion, and non-vehicle debt was $3.96 billion [7] - Capital expenditure for the quarter was $75.2 million [7] Share Repurchase Activity - During the first quarter of 2025, AutoNation repurchased 1.4 million shares for $225 million, with a total of 1.5 million shares repurchased for $254 million since the beginning of the year [8] - The company currently has $607 million remaining under its share repurchase program [8]

Company Overview - AutoNation, Inc. (NYSE: AN) is a retailer of both new and used cars in the United States, offering a diverse range of car brands, prominently including Toyota [1] Investment Philosophy - The investment philosophy focuses on identifying mispriced securities by understanding the financial drivers of a company, often revealed through a DCF model valuation [1]

Group 1 - The company AutoNation (NYSE: AN) is viewed positively, with a focus on its revenue generation from vehicle sales and related parts [1] - The automotive retail sector is highlighted as a potential area for investment, particularly in the context of market trends and consumer demand [1] Group 2 - Crude Value Insights provides an investment service centered on oil and natural gas, emphasizing cash flow and growth prospects [1] - Subscribers benefit from a comprehensive stock model account and detailed cash flow analyses of exploration and production firms [2]

Investment Rating - The report assigns an "Overweight" (OW) rating to General Motors (GM) and Ford, while Tesla and Rivian are rated "Underweight" (UW) [6][7]. Core Insights - The automotive industry is experiencing varied performance metrics across different companies, with GM and Ford showing potential upside in their stock prices, while Tesla and Rivian face significant downside risks [6][7]. - The report highlights the importance of valuation metrics such as EV/EBITDA, P/E ratios, and sales growth projections for assessing investment opportunities within the automotive sector [6][22]. Global Auto OEMs Investment Comparables - General Motors (GM) has a current price of $44.57 with a market cap of $43.067 billion and a target price of $53.00, indicating a 19% upside potential [6]. - Ford (F) is priced at $9.63 with a market cap of $38.294 billion and a target price of $11.00, representing a 14% upside [6]. - Ferrari (RACE) is valued at $439.97 with a target price of $460.00, showing a 5% upside [6]. - Tesla (TSLA) is currently priced at $241.37 with a target price of $120.00, indicating a -50% downside [6]. - Rivian (RIVN) has a price of $11.60 with a target price of $11.00, reflecting a -5% downside [6]. Global Auto Parts Suppliers Valuation Metrics - The average EV/EBITDA for US auto parts suppliers is projected at 1.8x for 2024, with a corresponding EBITDA margin of 12% [22]. - Aptiv (APTV) is rated "Overweight" with a current price of $51.71 and a target price of $102, indicating a 97% upside [22]. - Borg Warner (BWA) is rated "Overweight" with a price of $26.45 and a target price of $46, representing a 74% upside [22]. - Lear Corp (LEA) is rated "Overweight" with a price of $79.42 and a target price of $140, indicating a 76% upside [22]. Performance Metrics - The report indicates that the average revenue CAGR for US auto parts suppliers is projected to be 2% from 2023 to 2025 [74]. - The EBITDA margin for US auto parts suppliers is expected to be around 12% in 2025, with some companies showing higher margins [74][83]. - The report also highlights the financial returns of various suppliers, with some companies achieving significant returns on invested capital (ROIC) [54][56].

Financial Data and Key Metrics Changes - The total revenue for the first quarter was $6.7 billion, an increase of 3% year over year, and 4% on a same-store basis [16] - Adjusted EPS grew by 4% from the previous year to $4.68, marking the first year-over-year increase in eight quarters [10][20] - Total gross profit, including wholesale, increased by 12% from the first quarter of 2024 [8] Business Line Data and Key Metrics Changes - New vehicle unit sales increased by 7% year over year on a same-store basis, with premium luxury units up 14%, domestic units up 6%, and import units up 2% [7][20] - Used vehicle unit profitability rose by 13% to $16.62, reflecting a focus on margin and inventory management [7][22] - Customer financial services (CFS) profitability per unit increased by 3% year over year, with a finance penetration rate above 70% [24][25] Market Data and Key Metrics Changes - Same-store gross profit for used vehicles grew by 12%, while aftersales gross profit increased by 4% year over year [17][28] - The light vehicle market is projected to see a decline from over 17 million units to between 31 million units for the year, with expectations of cross-shopping mitigating some declines [14] Company Strategy and Development Direction - The company aims to increase store density in existing markets, as evidenced by the acquisition of two stores in Colorado [11][31] - Focus on controlling costs, cash flow, and capital deployment to enhance shareholder returns [15][35] - Continued emphasis on technician workforce development and internal promotions to improve service efficiency [28] Management's Comments on Operating Environment and Future Outlook - Management noted that the impact of tariffs will vary across OEMs and models, with expectations of competitive pricing strategies to maintain market share [53][56] - The company anticipates that the momentum seen in vehicle sales will continue, albeit at a moderating pace [12][34] - Management expressed confidence in the ability to generate cash flow and navigate the evolving market landscape [100] Other Important Information - The company repurchased $225 million of shares at an average price of $165 per share during the quarter, reducing the share count by 4% [10][32] - Adjusted free cash flow for the quarter totaled $237 million, with a cash flow conversion rate of 129% of adjusted net income [29] Q&A Session Summary Question: Impact of AutoNation Finance on PVR - Management acknowledged that the ramp-up of AutoNation Finance had a short-term impact on CFS PVR, estimating it at around $150 for the quarter [40][42] Question: Future Demand and Payback Period - Management indicated that while there may be some pull-forward demand, they do not expect a significant payback in the latter half of the year due to pent-up demand [46][48] Question: OEM Pricing Strategies - Management stated that OEMs will likely absorb some inflation and that the last lever pulled will be net transaction price appreciation [54][96] Question: After Sales Growth Contribution - Management confirmed that aftersales growth was driven by both price and volume increases, with mobile service initiatives contributing at a gross level [104] Question: Used Vehicle Supply and Demand - Management noted strong demand for lower-priced vehicles and emphasized efforts to increase used vehicle inventory [88][90]

Financial Performance - For the three months ended March 31, 2025, net income was $175.5 million, with diluted earnings per share of $4.45, compared to net income of $190.1 million and diluted earnings per share of $4.49 in the same period of 2024[121]. - Total revenue for the three months ended March 31, 2025, was $6,690.4 million, representing a 3.2% increase from $6,485.7 million in 2024[137]. - Operating income for the period was $336.0 million, a slight decrease of 1.3% from $340.3 million in 2024[137]. - Total gross profit for the three months ended March 31, 2025, was $1,219.9 million, up 1.8% from $1,197.9 million in 2024[137]. - The company reported net cash used in operating activities of $52.6 million for the three months ended March 31, 2025, compared to net cash provided of $294.5 million for the same period in 2024[213]. Revenue Breakdown - New vehicle sales accounted for 49% of total revenue and 14% of total gross profit, while used vehicle sales accounted for 29% of total revenue and 10% of total gross profit[117]. - New vehicle revenue increased by 9.0% to $3,248.1 million in 2025 from $2,979.3 million in 2024[137]. - Retail used vehicle revenue decreased by 2.3% to $1,792.1 million in 2025 from $1,833.8 million in 2024[137]. - Total revenue for used vehicles decreased to $1,922.4 million, a decline of 3.7% from $1,996.1 million in Q1 2024[152]. - Same store retail used vehicle revenue decreased by 2.1% to $1,766.5 million, attributed to a decrease in unit volume[153]. Sales and Inventory - U.S. industry retail new vehicle unit sales increased approximately 8% in Q1 2025 compared to Q1 2024, driven by higher manufacturer vehicle production and increased consumer demand[118]. - Retail vehicle unit sales for new vehicles increased by 6.0% to 62,387 units in 2025 from 58,863 units in 2024[137]. - New vehicle inventory units were 39,300 as of March 31, 2025, compared to 38,200 in the previous year, with cumulative write-downs of $1.3 million[125]. - Inventory days supply for new vehicles improved to 38 days in 2025 from 44 days in 2024, while used vehicles increased to 36 days from 31 days[138]. Segment Performance - Domestic segment revenue decreased by 2.2% to $1,717.4 million, primarily due to a decline in used vehicle revenue, which was impacted by lower unit volume and average selling prices[165]. - Import segment revenue increased by 3.4% to $2,047.3 million, driven by a 5.5% increase in new vehicle revenue, largely due to higher average selling prices[168]. - Premium Luxury segment revenue rose by 6.7% to $2,576.5 million, with new vehicle revenue increasing by 14.5% to $1,325.9 million[170]. - Premium Luxury segment income increased by 4.1% to $178.7 million, supported by higher gross profit across new vehicles and finance and insurance[170]. Expenses and Costs - SG&A expenses increased to $821.9 million in Q1 2025 from $793.1 million in Q1 2024, with SG&A as a percentage of total gross profit rising to 67.4% from 66.2%[179]. - Floorplan interest expense decreased to $46.5 million in Q1 2025 from $49.4 million in Q1 2024, primarily due to lower average interest rates[182]. - Other interest expense decreased to $42.3 million in Q1 2025 from $44.6 million in Q1 2024, driven by lower average debt balances[184]. Investments and Acquisitions - The company made cash payments of $69.6 million for business acquisitions during the three months ended March 31, 2025, having purchased one Domestic store and one Import store[199]. - The company is investing significantly in strategic initiatives, including the expansion of AutoNation Finance and AutoNation USA used vehicle stores[224]. Financial Position - As of March 31, 2025, the company's long-term debt, net of current maturities, was $3,104.5 million, an increase from $2,613 million as of December 31, 2024[203]. - The company had a leverage ratio of 2.56x and an interest coverage ratio of 4.33x as of March 31, 2025, both of which were in compliance with the covenants under its credit agreement[209]. - Cash and cash equivalents increased to $70.5 million as of March 31, 2025, compared to $59.8 million at December 31, 2024[189]. Market Conditions and Risks - Tariffs announced by the U.S. government in Q1 2025 could increase costs or consumer prices and limit inventory availability, potentially impacting business operations[120]. - The automotive retail industry is sensitive to economic conditions, including unemployment levels and consumer confidence, which could affect the company's performance[224]. - The company is subject to various risks associated with originating and servicing auto finance loans, which could adversely affect its business[224]. - The company’s operations are subject to extensive governmental laws and regulations, which could impact its business and financial results[224].

Financial Performance - Total revenue increased by 3% year-over-year, from $6486 million to $6690 million[4] - Gross profit increased by 2% year-over-year, from $1198 million to $1220 million[4] - Adjusted net income decreased by 3% year-over-year, from $190 million to $184 million[4] - Diluted adjusted EPS increased by 4% year-over-year, from $449 to $468[4] Sales Performance - New vehicle same store unit growth increased by 7% year-over-year[3,6] - Used vehicle gross profit increased by 12% year-over-year[3,4] - After-sales gross profit reached a record $568 million, with margin expansion exceeding 140 bps[3] AutoNation Finance - AutoNation Finance originations reached $460 million[3,13] - AutoNation Finance portfolio balance increased significantly from $566 million to $1451 million, with AN equity funding increasing from 61% to 74%[15] Capital Allocation - Share repurchases amounted to $225 million, reducing share count by 3%[3] - Capital expenditures were approximately 20% lower than in the first quarter of 2024[25]

Core Insights - AutoNation, Inc. (AN) has shown moderate performance over the past year, with a stock price increase of approximately 8% as the company continues to generate substantial cash flow and reduce its share count [1] Group 1 - The company has been successful in generating significant cash flow, which is a positive indicator for its financial health [1] - AutoNation has been actively reducing its share count, which can enhance shareholder value by increasing earnings per share [1] - Despite its positive performance, the stock has faced challenges and is not immune to market fluctuations [1]

Group 1: Earnings Performance - AutoNation reported quarterly earnings of $4.68 per share, exceeding the Zacks Consensus Estimate of $4.35 per share, and showing an increase from $4.49 per share a year ago, representing an earnings surprise of 7.59% [1] - The company posted revenues of $6.69 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.75%, compared to $6.49 billion in the same quarter last year [2] - Over the last four quarters, AutoNation has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Group 2: Stock Performance and Outlook - AutoNation shares have increased by approximately 2.1% since the beginning of the year, while the S&P 500 has declined by 6.8% [3] - The current consensus EPS estimate for the upcoming quarter is $4.47 on revenues of $6.72 billion, and for the current fiscal year, it is $18.22 on revenues of $27.02 billion [7] - The estimate revisions trend for AutoNation is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market in the near future [6] Group 3: Industry Context - The Automotive - Retail and Whole Sales industry is currently in the top 21% of over 250 Zacks industries, suggesting a favorable outlook for stocks within this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - AutoNation reported Q1 2025 revenue of $6.7 billion, a 4% increase year-over-year on a same-store basis[2]. - Total revenue for Q1 2025 was $6,690.4 million, a 3.2% increase from $6,485.7 million in Q1 2024[21]. - Total revenue for Q1 2025 was $6,655.0 million, up from $6,380.8 million in Q1 2024, marking a 4.3% increase[38]. - New vehicle revenue reached $3.2 billion, up $300 million or 10% compared to the previous year[10]. - New vehicle revenue increased by 9.0% to $3,248.1 million, while used vehicle revenue decreased by 3.7% to $1,922.4 million[24]. - New vehicle revenue increased by 10.2% to $3,247.6 million in Q1 2025 from $2,947.4 million in Q1 2024[38]. - Net income decreased to $175.5 million, compared to $190.1 million in the same quarter last year, resulting in diluted earnings per share of $4.45[21]. - EPS for the quarter was $4.45, down 1% from $4.49 a year ago, while adjusted EPS increased by 4% to $4.68[6]. Sales Performance - Same-store new vehicle retail unit sales increased by 7% to 62,379 units, while used vehicle retail unit sales decreased by 2% to 66,787 units[5]. - Retail new vehicle unit sales increased by 6.0% to 62,387 units, while retail used vehicle unit sales decreased by 1.6% to 68,000 units[27]. - Retail vehicle unit sales for new vehicles rose to 62,379 in Q1 2025, an increase of 7.1% from 58,227 in Q1 2024[38]. Profitability - Record After-Sales gross profit of $568 million, reflecting a 4% increase year-over-year[6]. - Gross profit rose to $1,219.9 million, reflecting a 1.8% increase compared to $1,197.9 million in the previous year[24]. - Total gross profit increased to $1,213.6 million in Q1 2025 from $1,179.0 million in Q1 2024, a growth of 2.9%[38]. - The gross profit per new vehicle retailed decreased by 15.8% to $2,803, while the gross profit per used vehicle retailed increased by 12.8% to $1,662[24]. - Gross profit from new vehicles declined to 5.4% in Q1 2025 compared to 6.6% in Q1 2024[39]. - Gross profit from used vehicle retail increased to 6.3% in Q1 2025 from 5.6% in Q1 2024[39]. - Total gross profit as a percentage of revenue slightly decreased to 18.2% in Q1 2025 from 18.5% in Q1 2024[39]. Expenses and Costs - SG&A as a percentage of gross profit increased to 67.4%, up from 65.6% in the prior year[10]. - The company reported a decrease in selling, general, and administrative expenses to $821.9 million, down from $793.1 million[24]. - Capital expenditures decreased to $75.2 million in Q1 2025 from $93.7 million in Q1 2024[30]. Liquidity and Capital Management - AutoNation's liquidity as of March 31, 2025, was $1.6 billion, including $71 million in cash[11]. - The company repurchased 1.4 million shares for $225 million at an average price of approximately $165 per share[9]. - Stock repurchases surged to $224.8 million in Q1 2025, significantly higher than $38.7 million in Q1 2024, with shares repurchased increasing from 0.2 million to 1.4 million[30]. - The leverage ratio stood at 2.56x, well below the covenant limit of 3.75x, indicating strong financial health[30]. Segment Performance - The finance and insurance segment reported a net revenue increase of 5.3% to $352.5 million[24]. - Interest and fee income increased to $41.9 million in Q1 2025 from $21.8 million in Q1 2024, a variance of $20.1 million[28]. - Total interest margin after provision for loan losses rose to $9.1 million in Q1 2025, compared to $4.6 million in Q1 2024, reflecting an increase of $4.5 million[28]. Revenue Mix - New vehicle revenue mix increased to 48.8% in Q1 2025 from 46.2% in Q1 2024[39]. - Used vehicle revenue mix decreased to 28.5% in Q1 2025 from 30.8% in Q1 2024[39]. - Parts and service revenue mix remained consistent at 17.4% in Q1 2025 compared to 17.8% in Q1 2024[39].