AutoNation Inc. (NYSE:AN) stock rose Friday after the auto retailer reported better-than-expected third-quarter results, beating Wall Street estimates despite flat revenue and weaker vehicle sales.
AutoNation Earnings Beat Estimates Despite Flat Revenue
Adjusted earnings rose 2% year over year to $5.11 per share, beating the analyst consensus estimate of $5.08.
Revenue was flat at $7.01 billion, exceeding expectations of $6.97 billion.
Gross profit fell 2% to $1.21 billion, while operating income dropped 16% to $314.6 million.
Same-store revenue declined 2% to $6.81 billion, while same-store gross profit fell 5% to $1.17 billion.
Same-store new vehicle retail sales dropped 5%, while used vehicle sales declined 6%.
During the earnings call, CEO Mike Manley said battery electric vehicle sales plunged 60% following the expiration of federal EV incentives in September 2025. Excluding electric vehicles, sales of gasoline-powered and hybrid vehicles increased 2%.
Management expects inventory improvements and operational changes to help restore growth in used vehicle sales.
AutoNation Expands Buybacks Amid Strong Liquidity
AutoNation ended September with $1.5 billion in liquidity, including $51 million in cash and $1.4 billion in available revolving credit.
The company increased its commercial paper program capacity to $2 billion in October.
Through Oct. 28, AutoNation repurchased 3.4 million shares for $668 million in 2026.
Manley said the company directed nearly 85% of adjusted free cash flow toward buybacks, reducing outstanding shares by 9% year to date.
The board authorized an additional $1 billion in repurchases in October, leaving $1.4 billion available as of Oct. 28.
Non-vehicle debt totaled $4.3 billion at quarter-end.
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After-Sales Business Hits Record Profit
After-sales gross profit rose 3% to a record $617 million, accounting for roughly half of AutoNation’s total gross profit.
Customer-pay and warranty gross profit each increased 5%, supported by traffic growth of 5% and 13%, respectively.
Despite stronger service traffic, Manley warned that economic pressure is prompting consumers to delay vehicle repairs and approve less work during service visits.
Manley said AutoNation is seeing more deferred maintenance and fewer labor hours per repair order, although he expects much of that work to return as repairs become necessary.
Management expects customer retention, technology and wholesale parts expansion to support further growth.
AutoNation Finance Profit Surges
AutoNation Finance increased quarterly operating profit to $15 million from $2 million a year earlier.
Its portfolio grew 41.8% to $2.9 billion, with 91% funded through nonrecourse debt.
Management expects about $120 million in operating cash flow from the finance business in 2026, rising to at least $150 million in 2027.
Vehicle Margins and AI Initiatives
New vehicle gross profit per unit fell to $2,176 from $2,281, while used vehicle gross profit per unit increased to $1,524 from $1,489.
Management expects seasonal strength in luxury vehicle sales during the fourth quarter.
AutoNation appointed Ravi Simhambhatla chief technology and AI officer, effective Oct. 1, to accelerate its digital transformation.
Cost-cutting initiatives launched in September are expected to generate savings through 2027 across labor, marketing, IT and discretionary spending.
AN Price Action: AutoNation shares were up 4.65% at $177.22 at the time of publication on Friday, according to Benzinga Pro data.
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