AutoNation Inc., one of the biggest car dealership chains in the US, posted second-quarter earnings that exceeded expectations on rising new car sales and record growth in its repair, financing and insurance units.
(Bloomberg) — AutoNation Inc., one of the biggest car dealership chains in the US, posted second-quarter earnings that exceeded expectations on rising new car sales and record growth in its repair, financing and insurance units.
On Friday, the company reported adjusted earnings of $6.29 a share that topped the $5.89 average estimate of analysts. Revenue was flat at $6.89 billion, but better than the $6.75 billion projected by Wall Street.
Inventory constraints began to ease in the quarter as new vehicle shipments from automakers increased, helping boost revenue from new car sales by 12% to $3.3 billion. Used-vehicle deliveries fell 11%, causing a 17% drop in revenue to $2.1 billion.
That’s a reversal from when Chief Executive Officer Mike Manley pivoted to selling more used cars because the chip shortage drained dealer lots of new models during the pandemic. With new car inventories replenishing, automakers are offering discounts that are sapping demand for used cars, which saw prices plunge in June for the biggest drop since the pandemic began.
The company saw its unit profitability narrow as income from luxury and domestic models declined. Its gross profit on each new vehicle sold in the quarter sank 25% to about $4,600, while that measure for used vehicles declined 3% to $1,870.
The automotive retailer said it expects margins to moderate in the remainder of the year as inventories continue to recover. Vehicle demand is expected to remain strong, the company said.
Manley continued to dial up AutoNation’s financing, maintenance and repair businesses, achieving record gross profit in those units. Revenue from maintenance and repair rose 11% to $1.1 billion.
“The strong performance during the quarter reflects the continued resiliency of our operations and the benefits of our diversified business model,” Manley said in a statement.
AutoNation opened its 16th outlet during the quarter in Colorado Springs, Colorado, and acquired five dealerships in Carlsbad, California.
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