AutoNation Inc.’s stock dropped 6% after the company reported third-quarter earnings that missed analysts’ expectations, driven partly by the impact of a software outage earlier in the year. Net income declined to $185.8 million ($4.61 per share) from $243.7 million ($5.54 per share) a year earlier, with adjusted earnings per share at $4.02, below the $4.36 FactSet consensus. Revenue decreased 4% to $6.586 billion, falling short of the anticipated $6.695 billion. The results highlight the challenges faced by the company in the current auto retail environment.
A major factor affecting AutoNation’s performance was a cyberattack on CDK Global, a software provider for dealerships, which disrupted operations nationwide over the summer. This issue reduced earnings per share by an estimated $0.21. Additional challenges included weather-related disruptions from hurricanes, which temporarily closed about 50 stores, and manufacturer stop-sale orders, primarily affecting premium luxury vehicles. Despite these setbacks, CEO Mike Manley expressed confidence in the company’s ability to address these obstacles and move forward.
AutoNation saw mixed results in vehicle sales. New-vehicle retail unit sales rose 1% to 63,150, while used-vehicle retail unit sales fell 8% to 66,454, largely due to a constrained inventory caused by the CDK outage at the start of the quarter. Revenue from new vehicles declined 1% to $3.2 billion, while used-vehicle revenue dropped 12% to $1.9 billion. Additional revenue streams, such as after-sales services and customer financial services, also experienced declines of 1% and 9%, respectively.
CFRA analysts maintained their “buy” rating on AutoNation stock despite the challenges but lowered their price target from $220 to $190. Analyst Garrett Nelson emphasized the company’s strong share buyback program, which has reduced its share count by over half since 2020. This strategy is expected to contribute to stronger earnings-per-share growth compared to peers, with improving auto-dealership fundamentals and lower interest rates anticipated to bolster results in 2025.
AutoNation also made progress on strategic adjustments, selling seven domestic stores and one import store, amounting to 11 franchises. The company’s stock has risen 2% year-to-date, underperforming the broader S&P 500 index, which has gained 21.8%. With its focus on stabilizing margins and delivering strong shareholder returns, AutoNation remains poised for recovery and long-term growth.
