AutoNation (AN) released results today and the news was far better than one would expect given its current operating environment.
America’s largest automotive retailer, today reported 2008 second quarter net income from continuing operations of $53 million or $0.29 per share, compared to year-ago net income from continuing operations of $79 million or $0.38 per share. After adjusting for certain items disclosed in the attached financial tables, net income from continuing operations for the 2008 second quarter was $59 million or $0.33 per share, compared to $76 million or $0.36 per share in the prior year. analysts had expected $.30 cents a share.
Second quarter 2008 revenue totaled $3.9 billion, compared to $4.5 billion in the year-ago period, driven primarily by lower new vehicle sales. In the second quarter, total U.S. industry retail sales declined 16%, based on CNW Research data. In comparison, in the second quarter AutoNation’s new vehicle unit sales declined 12%.
Commenting on the second quarter, Mike Jackson, Chairman and Chief Executive Officer, said, “Despite the fact that this past quarter was the most challenging automotive sales environment any of us have encountered, AutoNation delivered solid profitability.” Mr. Jackson also noted, “In the second quarter, the industry encountered $4.00 per gallon gasoline on top of the continued housing depression and credit crisis, resulting in a significant challenge as consumers are either postponing the purchase of vehicles or they are purchasing smaller vehicles that are more economical both at the time of purchase and at the pump. We now believe that, in 2008, U.S. new vehicle industry sales will decline to the low-14 million unit level.”
Mr. Jackson added, “In continuing response to the ongoing macroeconomic and industry challenges, we are executing a cost reduction plan with a targeted annualized run rate pre-tax savings of $100 million. In the first half of the year, we achieved approximately $25 million of this benefit. In the second half of the year, we expect to achieve approximately $50 million of savings, for a full-year 2008 impact of $75 million on a pre-tax basis. Our targeted annualized cost savings include reductions in advertising spending, corporate overhead expense and store personnel expense.”
Full release:
I don’t think (at least I hope) anyone is buying share of AutoNation now expecting an immediate payoff. This is a true value investment. The deal here is that when auto’s rebound, AutoNation, being the largest and also the most well run organization of the lot will benefit the most from its currently depressed levels.
Jackson is cutting costs and making the necessary moves to position the company for the rebound.
Watch him on CNBC this morning:
Nissan CEO Carlos Ghosn seems to back Jackson’s thoughts. The advantage Jackson has is that he will benefit from all the automakers, and whatever trend(s) emerge not just one.
With famed investors like Berkshires’s (BRK.A) Buffett, Sears’ (SHLD) Lampert, Gates, Leucadia (LUK) and Sullivan jumping into the sector, now it the time to be buying shares.
Disclosure (“none” means no position):Long AN
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