Could the auto industry finally be stabilizing? While few would claim
to be the sector's bellweather, it is the country's largest retailer of both new and used vehicles, and the 32% drop in first-quarter profit it reported today managed to beat Wall Street's expectations.
The better-than-expected earnings sent shares of AutoNation up 10% to $16.94 in afternoon trading.
AutoNation's results coincided with a report released by J.D. Power and Associates that claimed auto sales will remain at 30-year lows in April, but that the industry as a whole could be stabilizing. J.D. Power, which gathers real-time transaction data from more than 10,000 dealerships across the United States, expects a modest increase in auto sales over the next few months. For the full year the group projects the retail sales to total 8.5 million.
During the quarter AutoNation's earnings fell to $34.6 million or 20 cents a share, from $50.7 million, or 28 cents a year ago. Excluding one-time items such as asset sales and a purchase of its own debt, the company earned 23 cents per share. Analysts forecast earnings of 16 cents a share.
Revenue dropped 36 percent to $2.47 billion from $3.84 billion.
AutoNation has been cutting orders for new vehicles recently to keep inventory in line with weak demand. Sales of new vehicles at stores fell 43% during the quarter and traffic was off about 25%, said Chief Operating Officer Mike Maroone.
The company is expecting sales will improve in the second half of the year and is waiting to see how they will be impacted by the Treasury Department's Term Asset Loan Facility, or TALF, which kicked off at the end of March. "We definitely felt an improvement in business already in the last 10 days of March, and I now feel that the first quarter will prove to be the bottom in this whole difficult period," Chief Executive Mike Jackson said in an interview with the Associated Press.
Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. AP contributed to this report.