AutoNation (AN) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $6.6 billion, down 4% year-over-year, with EPS of $4.61 and adjusted EPS of $4.02, impacted by the CDK outage and lower used vehicle sales.

• Same-store new vehicle unit sales grew 2% year-over-year, while used vehicle unit sales declined 8% due to inventory constraints and the CDK outage, but demand for sub-$20,000 vehicles rose 4%.

• After-Sales gross profit reached a record $558 million, up over 2% year-over-year, now representing nearly half of total gross profit.

• Divested seven Domestic and one Import store, generating $156 million in proceeds and a $53.9 million pre-tax gain for capital redeployment.

• CDK Global system outage in June-July 2024 negatively impacted operations and Q3 EPS by $0.21, with full recovery by end of July.

Financial highlights

• Q3 2024 revenue was $6.59 billion (down 4.4% year-over-year); gross profit was $1.18 billion (down 9%); operating income was $351 million (down 16%).

• Net income for Q3 was $186 million (down 24% year-over-year); adjusted net income was $162 million; adjusted EPS was $4.02.

• Gross margin was 18.0% (down from 18.8%); operating margin was 5.3% (down from 6.1%).

• Floorplan interest expense rose to $61 million, up $22 million year-over-year, reflecting higher inventory balances and rates.

• Adjusted SG&A as a percentage of gross profit was 67.4% (68.6% GAAP), slightly above expectations due to CDK-related inefficiencies.

Outlook and guidance

• Management expects continued moderation of new vehicle margins due to increased inventory and incentives, with seasonal strength from premium luxury brands.

• Used vehicle sales anticipated to increase slightly year-over-year in Q4, supported by improved affordability and inventory.

• Aftersales business projected to grow mid-single digits annually; parts and service expected to remain a key profit driver.

• AN Finance expected to reach profitability by end of 2025 as portfolio approaches $1 billion.

• Focus remains on cycle times, cash conversion, and capital investments slightly below prior year.