AutoNation posts strong Q3 profits as car buyers turn to used
15:23, 21 October 2021
New and used car seller AutoNation reported higher revenues and profits as the business benefitted from high consumer demand in a low supply environment.
The results sent shares more than 6% higher to a price of more than $124 (£89.8) per share. Year to date, the company is trading more than 82% higher.
Supply chain constraints continue to limit the availability of new vehicles turning consumers to pre-owned segments, which made up 56% of total units sold in the quarter, up from 49% a year ago. All that demand sent same store used vehicle revenue up 53% year over year.
“Demand continues to outpace supply for new vehicles,” AutoNation CEO Mike Jackson said in a statement. “New vehicle sales are constrained by reduced production volume with low inventory levels. We expect this pent-up demand to support sales for the foreseeable future.”
Total revenue for the quarter increased 18% year over year to $6.38bn, while gross profit was up 31% to $1.27bn.
AutoNation reported earnings per share of $5.12, up 150% over third-quarter 2020 results. These results mark the sixth consecutive quarter the company set new record high earnings.
The company announced plans to acquire Baltimore-based Priority 1 Automotive along with the results, representing $420m in additional annual revenue. In April, AutoNation also announced the acquisition of 11 stores and one collision center from Peacock Automotive Group, which it said will add an additional $380m of annual revenue.
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Used car demand
Management noted that due to the supply chain constraints holding up new car production more consumers are settling for high-end used cars.
Used vehicle unit sales were up 19.7% year over year in the latest quarter, while new vehicle unit sales declined 11.5%. Those used vehicles tended to be more expensive driving more consumers to financing options, which drove $2.57bn of profits for AutoNation in the quarter.
Likewise, the new vehicles they are selling are more expensive, bringing in $5.48bn of profits in the quarter, up from $2.53bn during the comparable period last year, according to the earnings presentation.
“We have far more demand than we have shipments coming to us or inventory,” management said on the earnings call. “The pent-up demand is building and all of that is waiting in 2022 and 2023.”
Read more: GM seeks to double revenue with new EVs, software
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