• Total Revenue: $7.2 billion, an increase of 7% year-over-year, 8% on a same-store basis.
• Same-Store New Unit Volume Growth: 12% increase.
• Same-Store Gross Profit Growth: 5% year-over-year increase.
• Gross Profit Margin: 17.2% of revenue, down slightly from the previous year.
• Adjusted SG&A: 66.3% of gross profit, down more than 100 basis points from the third quarter.
• Adjusted Net Income: $199 million, compared to $216 million a year ago.
• Adjusted EPS: $4.97, $0.05 below the fourth quarter of 2023.
• AN Finance Portfolio: $1.1 billion, with originations tripling over 2023.
• AN Finance Delinquencies: Less than 3% at year-end.
• Share Repurchases: $100 million during the fourth quarter, $460 million for the full year, reducing shares by 7%.
• New Vehicle Inventory: 39 days' supply at year-end, down 25% from the third quarter.
• Used Vehicle Gross Profit: Increased 14% year-over-year.
• After-Sales Gross Profit: Up more than 5% year-over-year, with a margin expansion of 110 basis points.
• Free Cash Flow: $750 million for 2024, with a 105% conversion rate of net income into free cash flow.

• Warning! GuruFocus has detected 6 Warning Signs with AN.

Release Date: February 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• AutoNation Inc (NYSE:AN) achieved a 12% same-store new unit volume growth in the fourth quarter, indicating strong sales performance.
• The company reported a 5% year-over-year same-store gross profit growth, with a 110 basis point improvement in gross margin.
• AN Finance, a segment introduced in late 2022, grew its originations by three times over 2023, with a portfolio now exceeding $1.1 billion.
• AutoNation Inc (NYSE:AN) was recognized by Fortune Magazine as one of the World's Most Admired Companies, marking the fifth consecutive year as America's most admired automotive retailer.
• The company repurchased approximately $100 million of shares during the fourth quarter, contributing to a 7% reduction in shares during the year, reflecting strong capital return to shareholders.

Negative Points

• The CDK outage in early summer significantly impacted business operations in the second and third quarters of 2024.
• Despite strong performance, the gross profit margin of 17.2% was slightly down from the previous year, reflecting moderation in new vehicle unit profitability.
• Higher interest expenses from floor plan debt impacted fourth-quarter results, with expenses up $9 million from a year ago.
• Adjusted net income for the fourth quarter was $199 million, down from $216 million a year ago, indicating a decline in profitability.
• The used vehicle market faced supply challenges, particularly in mid- and higher-priced tiers, affecting sales performance.

Q & A Highlights

Q: How has the post-election environment affected AutoNation's sales, particularly in luxury and EV segments? A: Michael Manley, CEO, noted that the post-election environment, often referred to as the "Trump bump," has positively impacted luxury vehicle sales and EVs due to consumer sentiment and concerns over potential changes in incentives. This trend has continued into early 2025, with OEMs adjusting their strategies to balance inventory and demand.

Q: What are AutoNation's expectations for AutoNation Finance's funding needs in 2025? A: Thomas Szlosek, CFO, explained that AutoNation Finance's non-recourse funding increased from 60% to 75% in 2024. The company expects this to continue growing, especially with anticipated ABS offerings. The exact funding needs will depend on the growth of the loan portfolio, which is expected to outpace 2024 originations.

Q: Can you provide more details on the expected growth in parts and services for 2025? A: Michael Manley, CEO, stated that mid-single-digit growth is expected in the medium term, with 2025 potentially seeing higher growth due to easier comparisons from the CDK outage in 2024. The focus will be on increasing technician headcount and improving customer retention in the three to seven-year vehicle age segment.

Q: How does AutoNation view the potential impact of tariffs on its business? A: Michael Manley, CEO, mentioned that tariffs could affect both volume and margins. However, based on past experiences, manufacturers may find ways to mitigate these impacts over time, either through cost efficiencies or adjustments in pricing strategies to maintain market volumes.

Q: What is AutoNation's approach to capital allocation between share repurchases and M&A? A: Michael Manley, CEO, emphasized that capital allocation decisions are based on maximizing shareholder returns. While share repurchases have been significant, the company is also actively exploring M&A opportunities, particularly where they can achieve returns above their weighted average cost of capital.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.