AutoNation beats expectations on strong sales

Wed Apr 25, 2012 10:00am EDT

(Reuters) - AutoNation Inc (AN.N), the No. 1 U.S. auto retail group, posted better-than-expected earnings on Wednesday driven by a 10 percent increase in revenue due to strong new-vehicle sales, the company said.

AutoNation is the beneficiary of industry-wide strong auto sales and its Chief Executive Mike Jackson said he expects the strong sales to continue through 2012.

"The overall economy remains a question mark" while the auto industry experiences a strong recovery from a sales downturn in the recent recession, Jackson told Reuters from company headquarters in Ft Lauderdale, Florida.

"We are a bright spot in what is overall a very fragile and tepid recovery," he said.

U.S. average gasoline prices flirted with $4 per gallon in the first quarter but have retreated, which is generally encouraging for auto sales, Jackson said. But he added that more fuel-efficient cars and trucks that do not sacrifice size and comfort "paradoxically" boosted first-quarter auto sales.

Jackson said the auto industry was showing more solid strength than the overall U.S. economy, which was a key reason why AutoNation increased its forecast for 2012 U.S. auto sales to 14.5 million from the 14 million he forecast in January.

The U.S. gross domestic product is increasing at a rate of 2.5 percent, compared with first-quarter U.S. auto sales that rose more than 10 percent from the first three months of 2011.

First-quarter revenue was $3.66 billion and net income from continuing operations was $73.5 million, or 56 cents per share, compared with $70.3 million, of 46 cents per share a year ago. The 56 cents-per-share earnings from continuing operations is a company record high.

Analysts surveyed by Thomson Reuters I/B/E/S had expected earnings per share of 53 cents.

Of the 10-cent rise in earnings per share from continuing operations, half can be chalked up to AutoNation's aggressive buying back of its common shares, and the other half to strength of the business, Jackson said.

During the first quarter, AutoNation repurchased 11.7 million shares of its common stock, or 9 percent of its outstanding shares as of the end of 2011, for $405 million.

From April 1-24, the company repurchased 2.1 million shares of $70.8 million. As of April 24, there were about 122 million shares outstanding.

Net income in the quarter rose 5 percent to $73 million, or 55 cents per diluted share, compared with $69.4 million, or 46 cents per diluted share a year ago.

In AutoNation's dealerships, Toyota Motor Corp (7203.T) and Ford Motor Co's (F.N) namesake brands remain the top sellers. Toyota's namesake brand sales rose to 20 percent from 19.6 percent, and Ford's namesake and its luxury Lincoln brand rose to 18.2 percent from 17.1 percent.

The biggest drop-off as far as percentage of new vehicles sold at AutoNation stores was of Honda Motor Co's (7267.T) namesake vehicles, which fell to 11 percent from 13 percent.

Among AutoNation's key premium-luxury auto business, Mercedes-Benz increased its share of new-vehicle sales to 7.7 percent from 6.8 percent. Mercedes-Benz is owned by Daimler AG (DAIGn.DE).

New-vehicle sales accounted for 54.5 percent of quarterly revenue, and used-car sales were 25 percent.

Mike Maroone, AutoNation president, said the company would continue to seek new stores for brands that are underrepresented within a region of its U.S. footprint, which is largely the Sun Belt and coastal areas from the Atlantic Coast to California.

Maroone was not specific on which brands are needed in each area.

AutoNation has 260 new-vehicle franchises selling 32 auto brands in 15 U.S. states.

(Reporting By Bernie Woodall; Editing by Maureen Bavdek)