AutoNation's Fundamentals And Industry Trends Improving, Analyst Sees 42% Upside Potential - AutoNation (NYSE:AN)

Benchmark analyst Michael P. Ward had a Buy rating on AutoNation, Inc AN with a price target of $185.00.
Positive factors heading into the first quarter earnings season include higher new vehicle industry sales, a 5% increase in average transaction prices, elevated grosses, improving parts and services revenue, and a lower share count.
On the negative side, higher rates increase interest costs, and industry-used vehicle sales in the quarter were lower than expected.
The base operations of the dealer model have improved, and the positive variables that have driven record financial performance for AutoNation and the Dealer Group are likely to continue into 2023 and remain elevated into 2024.
AN’s cash generation and returns to shareholders have been at the top of the Dealer Comp Group, the company has reduced share count by almost 50% over the last two years, the company continues to invest in AutoNation USA, and the acquisition of CIG Financial expands the brand into captive financing.
The analyst lowered his estimates owing to reduced used vehicle industry assumptions, but performance should benefit from favorable industry trends, cost containment, and a lower share count.
He reduced his 2023 EPS estimate to $24.00 per share, down from $24.35 per share, primarily reflecting lower-than-expected used vehicle sales in the first quarter, but his 2024 estimate of $23.85 per share is unchanged.
The analyst expects improving new vehicle industry sales, growing Parts & Services revenue, and a lower share count to offset used vehicle and floorplan headwinds in 2023 and 2024.
The company’s ongoing cost improvement, the recovery in the Parts & Services business, the growth opportunities from further consolidation along with value creation from the used vehicle business, and the development of a captive finance subsidiary have led to record financial performance and the analyst believe performance will remain elevated into 2024.
Price Action: AN shares closed higher by 3.40% at $133.39 on the last check Tuesday.

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