Bloomberg News

AutoNation Rises on Luxury, Japan Supply Boosts: Detroit Mover

January 26, 2012

Jan. 26 (Bloomberg) -- AutoNation Inc., the largest U.S. auto retailer, climbed in New York trading after reporting quarterly profit that beat analysts’ estimates as it boosted luxury-car deliveries and inventory from Japanese automakers.

AutoNation gained 1.3 percent to $36.82 at the close in New York after releasing fourth-quarter results. The Fort Lauderdale, Florida-based company had an intraday high of $38.27.

Chief Executive Officer Mike Jackson benefited from Bayerische Motoren Werke AG and Daimler AG’s battle to unseat Toyota Motor Corp.’s Lexus as the top-selling U.S. luxury brand. Shipments from Japanese automakers such as Toyota and Honda Motor Co. to AutoNation outlets recovered by December to levels before the March 11 earthquake and tsunami that disrupted production and parts supply.

“The auto recovery is under way and we’re at a positive point in the economic recovery,” Jackson said today in a phone interview.

Net income rose to $69.4 million, or 49 cents a share, from $67.3 million, or 45 cents, a year earlier, AutoNation said today in a statement. Profit excluding some items was 51 cents a share, topping the 49-cent average estimate of 13 analysts surveyed by Bloomberg. Sales rose 13 percent to $3.68 billion.

AutoNation’s retail deliveries of new luxury vehicles, which include the BMW, Lexus, and Daimler’s Mercedes-Benz brands, climbed 28 percent, exceeding sales increases of domestic and import cars and trucks. BMW snapped the Lexus brand’s 11-year run as the top-selling premium automaker in the U.S. last year, outselling Mercedes by 2,715 vehicles.

Industry Forecast

U.S. light-vehicle sales may be about 14 million this year for the industry, Jackson said in the statement, reiterating a forecast made Jan. 9 during the North American International Auto Show in Detroit. Industrywide deliveries were 12.8 million in 2011, according to Autodata Corp., a Woodcliff Lake, New Jersey-based researcher.

“What’s supporting sales is a genuine replacement need,” Jackson said. “Vehicles are simply too old, almost 11 years old on average. We have excellent financing for our customers. There is great financing ability.”

Toyota and Honda’s namesake brands may gain the most market share in the U.S. this year because loyal buyers deferred purchases as the automakers based in Toyota City, Japan, and Tokyo dealt with supply issues last year, said Michael Maroone, AutoNation’s chief operating officer.

The industry is unlikely to enter a “price war” because the auto manufacturers will scale back “aggressive” production plans if the economic recovery stalls, Maroone said in a phone interview.

Lessons Learned

“The industry has learned its lesson on the costs of oversupply, both in incentive costs and residual-value costs,” he said. “You’ll see moderate levels of incentives and they’ll be used tactically to try to reduce some inventory, but I don’t think you’ll see an ‘incentive war’ in 2012.”

AutoNation bought back $217.8 million in company stock, or 6.3 million shares, during 2011’s fourth quarter and repurchased $122.1 million more this year through yesterday, according to the statement. The company has authorization from its board to repurchase as much as $278 million more.

--Editors: Bill Koenig, John Lear

To contact the reporter on this story: Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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