Strong fourth-quarter earnings pushed AutoNation stock to an all-time high

Strong earnings report for the fourth quarter automation On Friday it pushed the auto dealer’s stock to a new all-time high and its best day in nearly three years.

The Florida-based dealer group reported adjusted earnings per share of $6.37 and revenue of $6.7 billion for the prior quarter. That compares to analyst expectations of $5.83 per share and $6.5 billion in revenue, according to Refinitiv.

AutoNation closed Friday at $157.30 a share, marking a new high for the auto dealer’s stock after up 11.4% through the end of the week. It was the stock’s best daily performance since April 2020 and a new record closing price.

The increase followed AutoNation’s 25% reduction in shares outstanding last year as it repurchased 15.6 million shares, including 4.6 million during the fourth quarter.

AutoNation CEO Mike Manley attributed the strong quarter and record year for earnings to operational execution as well as new all-time high earnings in aftermarket and customer financing.

“During the year, we expanded our footprint, introduced additional transportation solutions, and leveraged our strong cash flow to fund investments and return capital to shareholders,” Manley said in a statement.

AutoNation’s 2022 cash flow from operations was a record $1.7 billion. Its net income last year was roughly flat from 2021, though it fell 26% in the fourth quarter to $286.4 million.

Large dealers such as AutoNation reported record results during the coronavirus pandemic, as consumer demand remained resilient but new-vehicle inventories were at record lows due to production disruptions due to the global health crisis as well as supply chain problems.

Circumstances have prompted AutoNation to focus on selling more used cars than new ones during the pandemic, as those who cannot afford or find a new car have moved into the used car market. That drove prices to new records and profits from used car sales.

Car inventories have been slowly rising for many car brands in recent months. However, there are still hurdles as Wall Street watches for a “demand destruction” scenario where pent-up demand from the past three years is exhausted.

AutoNation has not released guidance for 2023. Manley told Automotive News that he expects the seasonally adjusted annual rate of light vehicle sales to approach 15 million this year, up from 13.7 million in 2022.

“I believe that for the foreseeable future, the retail industry will continue to evolve including how customers approach vehicle ownership and use,” he said during an earnings call on Friday. “It’s an exciting time, frankly, to be in this sector and we believe the evolving landscape offers many opportunities.”