July 18--Fort Lauderdale-based AutoNation reported strong quarterly results Thursday, but analysts expected better and the stock price fell.
The country's largest dealership chain said second-quarter revenues hit $4.8 billion, up 8 percent, and net profit reached $100 million, up nearly 12 percent compared to a year ago. Earnings per share rose by more than 10 percent for the 15th straight quarter.
But analysts had forecast earnings a bit higher, so the stock price slipped 8.2 percent Thursday -- down $5.01 to close at $55.82 per share on the New York Stock Exchange.
AutoNation leaders said analysts underestimated the company's hefty outlays in the quarter on online programs. The company is speeding up its $100 million digital investment this year and next to help extend its competitive edge over rivals, said Chief Executive Mike Jackson.
The investment already includes more ads to lure customers to websites now branded as AutoNation coast-to-coast. And it upgrades those websites to allow such features as scheduling appointments for repairs and paying for those services online.
By 2016, AutoNation aims to offer an integrated system that will let customers on the sites see actual inventory, obtain prices and make a deposit online for new or used vehicles, Jackson said.
"The consumer wants one experience," said Jackson, explaining why AutoNation is pioneering the online systems. "They want to move seamlessly back and forth between the digital world and stores."
AutoNation now faces challenges to repair thousands of recalled cars, including many developed by General Motors under its former structure.
"The recall activity has put a strain on our service departments," Chief Operating Officer Mike Maroone said Thursday. "We need to add more technicians in every market and get customers in and out faster."
Jackson said it's become clear that "dealing with the old GM was like dealing with the three monkeys: See no reality, hear no reality, and speak no reality."
But he believes the new chief at the reorganized GM, Mary Barra, should remain at the helm.
"She has taken many courageous steps," including meeting with victims of accidents of flawed cars, conducting an aggressive investigation, hiring compensation expert Kenneth Feinberg and make dramatic changes on how GM functions, Jackson said.
Despite the recall problems, sales of new vehicles in the U.S. market remain on pace to top 16 million units this year, up from 15.6 million last year, Jackson predicted. He has correctly forecast sales for years -- while many rivals underestimated the recovery.
AutoNation has been boosting earnings per share in part by buying up more stock. In the second quarter, it re-purchased 1.1 million shares of common stock for roughly $64.1 million. As of July 16, it still had authorization for its board to buy back about $336 million more in stock.
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