KMX reports Q418 results on 3/29. We lowered our unit comp to 2.5% from 6% our EPS to $4.99 (was $5.17) with lower SBC helping EPS. We also make modest cuts to 2019 and 2020 est. (Exhibit 20).
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General Motors disclosures should remind investors that GM has an interesting SOTP angle. While the 10K dropped language related to timing of Cruise Commercialization (we still expect this w/in the next 12-months), the company is clearly preparing for bigger things. Cruise employees and management are receiving Stock Options and RSUs that vest upon an IPO. On the negative side, GM also continues to disclose potential residual risks related to the bankruptcy of old GM (Plaintiffs want 30 MM additional shares for the GUC trust; GM will fight this at a March 11 hearing); The Takata recall could cost $1.2 bn (though GM is still seeking to avoid a recall).
Yesterday AM (2/13/2019), LAD reported Q4 results. Total revenue growth of 10% missed cons. of 11% but beat our 5%. EPS of $2.57 beat cons. of $2.45 and our $2.13. Shares were down 4% (vs. flat for the SP 500).
We expect the US Dept of Commerce to release a report this weekend asserting that automotive-related imports are a national security threat, thus authorizing the Executive branch to enact tariffs without Congressional approval under the Section 232 statute. We think actual tariff enaction is unlikely given widespread opposition from U.S. constituencies (Auto Dealers are politically powerful; even the UAW has not offered its endorsement). Nevertheless, general uncertainty during the 90-day post-report evaluation period could have stock implications: Slightly negative for U.S. Suppliers, negative for U.S. Dealers and Aftermarket Retailers, negative for non-U.S. OEMs, and neutral for U.S. OEMs.
This morning (2/6/19), ABG reported Q4 2018 results. Total revenue growth of 6.5% beat cons. +3.5% and our +6.2%. Front-end yield and SG&A/ gross profit were both better than expected. EPS of $2.20 (incl. $0.06 acct. benefit) beat consensus of $2.06 and our $2.04. Shares were +1-2%, vs. a flat S&P 500.
Dealer earnings start on 2/5; however, AN does not report until 2/22. The only other time that it reported even remotely this late was in Q4 09 on 2/11. Hard to tell what this means, though a later date would give time to stabilize operations, finish CEO search, or switch to Non-GAAP.
The Market is bracing for challenges as we transition to 2019, including lower Auto Production (particularly in China and Europe during 1H19), higher Rates (which raise concerns about Mix, Pricing), the strong U.S. Dollar, Regulatory Content, unpredictable Government Policy/Tariffs, the burden of increased Spending on Technology with uncertain returns, and in some cases discontinued passenger car products.
KMX reported Q3 2018 pre-market. Used unit comps of -1.2% were below Cons. of 0.7% and our 0% but met the scrape bar. Adj. EPS of $1.09 beat Cons. of $1.00 and our $1.01 as Wholesale, CAF, tax, buybacks and SBC made up for a short fall in unit sales. Shares are +4% vs. -1% tape.
KMX reports Q318 results on 12/21. We are lowering our unit comp to 0% from 3%, offset by lower SBC, so our EPS stays at $1.01. After addressing 4 focal points, we find it difficult to be constructive when industry demand is eroding and spending needs are increasing. However, trough valuation keeps us at PP for now. We are lowering our PT to $64 (was $75).
This AM (12/4/2018), KMX announced the rollout of its new omni-channel offering that it’s launching in Atlanta. KMX plans for it to be available to a majority of its customers by Feb. 2020. In its FQ2 call, KMX said that it would bring this experience to a major metro market by year end; however, it did not name the market nor signal a timeline for a broader roll-out.
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