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].

Core Viewpoint - The Zacks Auto Retail and Wholesale industry shows robust prospects despite a challenging tariff environment, driven by a diversified product mix and multiple income streams [1] Industry Overview - The automotive sector's performance is heavily reliant on retail and wholesale networks, involving operations through dealerships and retail chains, including the sale of new and used vehicles, light trucks, auto parts, and providing repair and maintenance services [2] - The industry's success is closely tied to economic conditions, with higher disposable income leading to increased investment in big-ticket items, while tighter budgets result in reduced discretionary spending [2] - The COVID-19 pandemic has significantly reshaped the industry, increasing the focus on e-commerce [2] Factors Influencing Industry Prospects - Auto retailers benefit from a diversified product mix and multiple income streams, which reduce risk and position them for long-term growth, generating income from new and used vehicle retail, finance, insurance, and automotive repair [3] - Strategic acquisitions are being utilized by auto dealers to expand into new markets, thereby increasing market share and enhancing offerings [4] - Investment in digital platforms aligns with consumer preferences for online transactions, enabling dealers to reach a broader audience and drive higher profitability [4] Tariff Impact - A 25% tariff on imported vehicles and auto parts, imposed by the U.S. government, is expected to increase manufacturing costs and disrupt supply chains, potentially raising car prices by $5,000 to $15,000 [5] - Rising vehicle prices may lead consumers to consider used vehicles, increasing demand and prices for used cars, which could negatively impact new and used vehicle retailers' top-line growth [5] Industry Ranking and Performance - The Zacks Auto Retail & Wholesale industry ranks 46, placing it in the top 19% of around 250 Zacks industries, indicating bright near-term prospects [6][7] - The industry has outperformed the S&P 500 and the Auto, Tires, and Truck sector over the past year, returning 8.8% compared to the S&P 500's growth of 5.2% and the sector's decline of 9.8% [10] Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 8.18X, significantly lower than the S&P 500's 15.58X and the sector's 14.97X [13] - Over the past five years, the industry has traded between 4.78X and 10.79X, with a median of 7.13X [14] Company Highlights - **Lithia Motors, Inc. (LAD)**: A leading automotive retailer with strategic acquisitions increasing market share and enhancing its portfolio. The company achieved a cost-saving plan of $200 million and expects an additional $50-$70 million in interest cost savings in 2025 [19][20] - **AutoNation, Inc. (AN)**: One of the largest automotive retailers, improving its finance division and after-sales gross profit margin by nearly 250 basis points since 2019. The company anticipates mid-single-digit growth in its after-sales business [23][24][25] - **Group 1 Automotive, Inc. (GPI)**: A leading automotive retailer focusing on acquisitions and restructuring to improve operational efficiency. The company expects year-over-year growth of 9.91% in sales and 4.51% in EPS for 2025 [29][30]

Core Viewpoint - AutoNation (AN) is expected to report quarterly earnings of $4.25 per share, reflecting a decline of 5.4% year-over-year, while revenues are forecasted to increase by 0.6% to $6.52 billion [1] Earnings Estimates - The consensus EPS estimate has been adjusted upward by 1% over the past 30 days, indicating a reassessment by analysts [1][2] Revenue Projections - Analysts estimate 'Revenue- Parts and service' at $1.24 billion, showing a year-over-year increase of 5.4% [3] - 'Revenue- Finance and insurance net' is projected to reach $334.26 million, a slight decrease of 0.1% from the previous year [4] - 'Revenue- Used Vehicle' is expected to be $1.92 billion, indicating a decline of 3.9% year-over-year [4] - 'Revenue- New Vehicle' is forecasted at $2.97 billion, reflecting a decrease of 0.4% compared to the prior year [4] Vehicle Sales Estimates - 'Retail vehicle unit sales - New' are expected to reach 60,200, up from 58,863 year-over-year [5] - 'Retail vehicle unit sales - Used' are projected at 69,064, slightly down from 69,121 in the previous year [6] - Total 'Retail vehicle unit sales' are estimated at 129,263, compared to 127,984 reported last year [7] Profitability Metrics - 'Revenue per vehicle retailed - New' is expected to be $48,553.82, down from $50,614 year-over-year [5] - 'Gross profit per vehicle retailed - Finance and insurance' is projected at $2,596.50, compared to $2,615 in the same quarter last year [6] - 'Gross profit per vehicle retailed - Used' is estimated at $1,415.61, down from $1,473 year-over-year [7] - 'Gross profit per vehicle retailed - New' is expected to be $2,342.75, significantly lower than $3,328 reported last year [8] Stock Performance - AutoNation shares have decreased by 6.7% over the past month, while the Zacks S&P 500 composite has declined by 8.9% [9]

Core Insights - AutoNation has appointed Jeremy Tucker as Chief Marketing Officer, effective April 21, 2025, who will report directly to CEO Mike Manley [1][2] - Tucker brings extensive experience in brand loyalty, team leadership, and innovative marketing strategies, aligning with AutoNation's commitment to customer excellence [2][3] - His previous roles include Executive Vice President and Global Chief Marketing Officer at Spin Master, where he led franchise development and brand growth in over 100 countries [3][4] Leadership Experience - Tucker has a proven track record in high-performing teams and transformative results, having served as Chief Marketing Officer at Planet Fitness, where he accelerated digital transformation and boosted membership [4] - At Nissan, he was responsible for U.S. marketing, leading to four consecutive years of market share growth through impactful marketing campaigns [4] - His experience at The Walt Disney Company involved repositioning the Disney Princess franchise, increasing its global market share [4] Company Background - AutoNation is one of the largest automotive retailers in the U.S., offering a wide range of new and used vehicles, financing, parts, and maintenance services [7] - The company has raised over $40 million for cancer-related causes, demonstrating its commitment to community impact [7]