AutoNation's Earnings Report: Used Vehicle Revenue Decline Puts Pressure on Carvana
AutoNation recently reported its fourth-quarter earnings, exceeding expectations with $5.02 per share, surpassing estimates for $4.89. However, while the revenue of $6.77 billion fell just slightly short of forecasts for $6.68 billion, it is important to delve deeper into the underlying details.
Compared to the same period last year, both the earnings and revenue have decreased. In the previous year, AutoNation posted earnings of $6.37 per share on revenue of $6.7 billion. Moreover, a closer look reveals a troubling trend in the company's results. While new-vehicle revenue for the fourth quarter increased by 7% to reach $3.4 billion, used-vehicle revenue witnessed a significant decline of 12% to $1.9 billion. Analysts surveyed by FactSet had anticipated new-vehicle revenue of $3.1 billion and used-vehicle revenue of $2 billion, making the actual results fall short of expectations.
According to Chief Executive Mike Manley, the decrease in demand for higher-priced used vehicles can be attributed to factors such as affordability and the increasing availability of new vehicles at lower prices. Additionally, subsidized lending rates have made new products more appealing to customers. Manley discussed these factors during the company's conference call on Tuesday.
While AutoNation's stock has only seen a marginal decrease of 0.1% since the report, companies specializing in used car sales, including Carvana and CarMax, have experienced more substantial declines. Carvana's stock dropped by 6.6% following the disappointing used car revenue results from AutoNation, and CarMax's stock was down by 5.7%.
Investors await Carvana's fourth-quarter earnings report, which is scheduled to be released after the market closes on Feb. 22. Analysts surveyed by FactSet anticipate a 13% decrease in used car revenue compared to the prior year, with an expected total of $1.8 billion.
It seems that the expectations have been significantly readjusted, which may prove to be challenging for Carvana to meet.
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