AN grew EBITDA by +24% (adjusted for asset sales, investment gains, and floorplan interest), which beat the +17% we were expecting on better GP growth and tighter SG&A. AN shares were +7% vs. flat S&P 500.
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With concerns over the Coronavirus spreading, we think US Retailers will likely be viewed as near-term relative safe-haven stocks given limited direct exposure to China. However, should the virus spread into a pandemic, especially in China, we see a greater impact to US retailers from indirect supply chain exposure or US GDP growth.
To help gear up for 2020 we analyzed 2019 performance, identified 10 key themes into 2020, analyzed post Q3 earnings reaction, and analyzed the key issue facing each stock under coverage into 2020.
AN grew adj. EBITDA by +7.7% (adjusted for asset sales, severance, and floorplan interest), which slightly beat the +7.2% we were expecting on better SG&A. AN shares were down 2% vs. a flat S&P 500.
Today (10/07/19) we are assuming broader coverage of hardlines and internet retail with deep-dive reports on four companies, including a LOW downgrade to PP. We also have two ratings changes from our existing retail coverage (AAP to UP and ORLY to OP), and assuming coverage of six additional retail names with concise 1-page investment tear sheets.
We wanted to flag a few highlights in today's (07/24/19) Wolfe Research Auto Daily....
AN grew adj. EBITDA by 11.5% and beat on Rev and EPS. Despite the bizarre CEO departure, the combination of material earnings revisions, trough valuation, high short interest, and an underperforming stock were too powerful and AN shares were up 11%.
In one of the most bizarre earnings in memory, AutoNation significantly beat Q2 earnings, but then announced the sudden, mutually-agreed-upon departure of its recently-hired CEO Carl Liebert (hired 2/22 after an exhaustive search). The company cited fit issues in the press. The company promoted CFO Cheryl Miller to CEO, promoted Jim Bender to the vacated COO role (that wasn’t filled after Lance Iserman departed in the January restructuring) and promoted CAO Chris Cade to Interim CFO.
Friday AM (4/26/19), AN reported total rev growth of -5.3% missing Cons of -0.9% and our -3.5%. EPS of $1.02 beat Cons/Our $0.91 on better margins. Shares were +7% on the day and 13% for the week largely in-line with Dealer group and far exceeding the S&P 500 (Exhibit 2).
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