On Friday, CFRA raised the stock price target for AutoNation Inc. (NYSE:AN) shares to $190 from the previous target of $180, while reiterating a Strong Buy rating on the stock. The adjustment follows AutoNation's first-quarter earnings, which surpassed consensus expectations.
AutoNation reported an adjusted earnings per share (EPS) of $4.49 for the first quarter, a figure that, despite being a 26% decrease from the $6.07 reported in the same quarter of the previous year, still exceeded the consensus estimate of $4.25.
The company's sales experienced a modest increase of 1.4%, totaling $6.49 billion, albeit slightly below the consensus forecast by $20 million. However, the company's gross margin saw a contraction of 160 basis points to 18.5%, which was still 40 basis points above the consensus.
A significant contribution to the better-than-expected margins came from AutoNation's Parts and Service business. The segment saw a 9% rise in gross profit and a 50 basis point expansion in gross margin to 47.4%.
Moreover, AutoNation has authorized an additional $1 billion for share repurchases, signaling a continuation of its aggressive buybacks and share count reduction strategy. The company ended the quarter with total liquidity of $1.7 billion.
The CFRA analyst maintained adjusted EPS estimates of $20.25 for 2024 and $21.25 for 2025. The new price target is based on a projected 2025 P/E of 8.9x, which represents a discount to AutoNation's 10-year mean forward P/E of 10.3x.
The analyst also noted AutoNation's robust earnings history, with the company only missing bottom-line estimates once since 2018, suggesting that current consensus estimates might be on the conservative side.
InvestingPro Insights
AutoNation Inc. (NYSE:AN) continues to navigate the competitive Specialty Retail industry with a strategic approach that includes aggressive share buybacks, as highlighted by the recent authorization of an additional $1 billion for repurchasing shares.
This move is a testament to the management's confidence in the company's value, aligning with the InvestingPro Tip that management has been actively reducing the share count. While AutoNation's net income is expected to decline this year, analysts remain optimistic about the company's profitability, with a forecast of remaining profitable in the current fiscal year.
From a valuation standpoint, AutoNation is trading at a low earnings multiple of 7.7, which is further emphasized by the adjusted P/E ratio for the last twelve months as of Q4 2023, standing at 6.58. This positions the company as an attractive investment when considering its earnings power. Moreover, the company's robust return over the last five years signals its potential for long-term growth, an important consideration for investors looking at historical performance.
For readers interested in a deeper analysis, there are 6 additional InvestingPro Tips available, providing further insights into AutoNation's financial health and market position. To explore these tips and make more informed investment decisions, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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