Earnings Preview: AutoNation Inc.

AP News
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Posted: Oct 26, 2010 12:10 PM
Earnings Preview: AutoNation Inc.

AutoNation Inc., the nation's largest automotive retailer, reports its third-quarter financial results before the stock market opens Thursday.

WHAT TO WATCH FOR: Any sign of a more consistent recovery for car sellers.

While most believe the auto industry's recovery is under way, Americans' enthusiasm for new cars and trucks have cooled in recent months on worries about the economy, signaling that the recovery is far from certain.

But automakers are still predicting a gradual recovery in the last half of the year, improving from the historic low of 10.4 million last year, but still well below the record high of more than 17 million in 2000.

AutoNation, based in Fort Lauderdale, Fla., said earlier this month that new vehicle sales rose 3 percent in the third quarter compared with the year-ago period. And CEO Mike Jackson has said a "real, genuine recovery in the auto industry" is under way.

The company said sales increased 35 percent in September compared with the previous year, when government's Cash for Clunkers rebate program, which ran during July and August of 2009, drew buyers who otherwise would have waited until later in the year. New vehicle sales fell 17 percent in August and were up 5 percent in July.

WHY IT MATTERS: The results at AutoNation, which owns nearly 250 new-vehicle franchises in 15 states, are being watched by car manufacturers trying to gauge the extent of the recovery.

Recovery of sales would suggest greater availability of consumer credit and more spending, critical elements in bringing an end to the worst economic downturn since the Great Depression.

WHAT'S EXPECTED: Analysts surveyed by Thomson Reuters expect AutoNation to earn 42 cents per share on revenue of $3.21 billion.

LAST YEAR'S QUARTER: AutoNation reported net income of 36 cents per share on revenue of $2.91 billion.