AutoNation Profits on Housing-to-Energy U.S. Bright Spots
AutoNation Inc. (SAH), the largest U.S. retailer of new cars and trucks, jumped after reporting quarterly profit that beat analysts’ estimates as the housing and energy industries boosted vehicle demand.
AutoNation climbed 1.9 percent to $43.30 at the close in New York. The shares surged as much as 12 percent earlier, the biggest intraday jump since February 2011. AutoNation has increased 28 percent in the past 12 months, outpacing the Standard & Poor’s 500 Index (SPX)’s 11 percent rise.
AutoNation is benefiting from stabilization and recovery in the housing market, particularly in states such as California, Nevada, Arizona and Florida, Chief Executive Officer Mike Jackson said in an interview. The retailer also is getting a boost from growth in the energy sector in Texas, as well as a broader U.S. auto market that Jackson forecasts will increase by about 1 million new-vehicle sales this year.
“Those three bright spots in the economy -- energy, housing and automotive -- all work for us,” Jackson said by telephone. “For the automotive recovery, we still think we’re in the early innings.”
First-quarter net income rose to $83 million from $73 million a year earlier, the Fort Lauderdale, Florida-based company said today in a statement. Profit from continuing operations climbed 21 percent to 68 cents a share, topping the 64-cent average estimate of 13 analysts surveyed by Bloomberg. Sales increased 12 percent to $4.1 billion.
“The housing recovery has given consumers a sense of worth and stability around their biggest asset: their home,” Jackson, 64, said in a separate interview on Bloomberg Television.
AutoNation began to rename all of its mass-market brand franchises in the first quarter of this year after posting record profit for 2012. The dealership group’s non-luxury domestic and import franchises will use the AutoNation moniker.
The company has shifted about 30 percent of those franchises to names such as AutoNation Chevrolet of Pembroke Pines, a store between Miami and AutoNation’s headquarters in Fort Lauderdale. The franchise was previously Maroone Chevrolet of Pembroke Pines.
AutoNation is boosting marketing spending by about 20 percent in the first half to inform customers about dealership name changes. The switch will be completed by the end of the second quarter, Jackson said.
The rebranding effort boosted the company’s selling, general and administrative expenses by an incremental $6.5 million in the quarter, or about 3 cents a share, Mike Maroone, AutoNation’s chief operating officer, said in an interview.
“Being unified under a coast-to-coast brand gives us a huge advantage in digital,” Maroone said by telephone. “We’re making some very significant investments. A big chunk of that ad spend is in digital, as well as in broadcast.”
AutoNation also disclosed in a regulatory filing today that it may begin posting material information to the company’s Twitter feed and Facebook page, or on the Twitter and Facebook accounts of CEO Jackson. The U.S. Securities and Exchange Commission issued guidance earlier this month permitting companies to use social media sites to communicate announcements.
“It’s just accepting the new reality of the marketplace today,” Jackson said on Bloomberg Television. “These are wonderful communication tools that are instantaneous with the broadest reach that you could possibly want.”
The company is forecasting industrywide U.S. vehicle sales to climb to the mid-15 million-unit range in 2013 from 14.5 million last year.
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