It certainly has been a rocky fourth quarter earnings season, as consensus for overall S&P 500 continues to receive cuts and lowered expectations.  Meanwhile, companies are feeling the heat from currency exchange rates and lower oil, which has hit earnings and lowered expectations for 2015. Despite that fact, results thus far are in line with historical earnings trends and still represent roughly 6% earnings growth from 2013, when looking at S&P 500 EPS.  While some companies are struggling and lowering guidance, AutoNation is blowing estimates out of the water and reporting strong growth. As a result, shares of AutoNation are posting a strong rally, up over 6% to $62.82.

AutoNation Posts Strong Earnings, Sees Industry Growth Continue

AutoNation flies past analysts’ estimates

Analysts polled were looking for earnings per share of $0.91 on revenue of $4.9 billion for fourth quarter 2014. This morning, AutoNation reported actual results of $1.02 earnings per share on revenue of $5.05 billion.  Diving further into the earnings report, management stated that the company saw a 28% sales increase in US car brands, 12% sales increase for international car brands and 10% sales increase for “premium luxury brands” during the last four months of 2014. Furthermore, sales of new cars rose 11% and used car sales increased 9%.

Further aiding the largest dealership group in the US, AutoNation CEO Mike Jackson, said that low gas prices, ability for good financing options, and the overall need for consumers to replace their older cars, helped provide the strong results.  Jackson said during the earnings call that he expects gas prices to remain below $3 a gallon nationally, for the rest of the year.

Future growth of US auto sales remains bullish

Jackson said that he expects US car sales for the entire industry to top 17 million in 2015.  If the forecast becomes fact, it will be only the third time the US auto industry has seen sales past that figure, and it last happened in 2000 and 2001.  Essentially, what is being said here, is the fact that the US auto industry is expected to remain strong and continue to grow.  As CEO Jackson pointed out earlier, lower gasoline sales are a serious catalyst for this forecast, and it certainly is a boon for auto makers to have cheap gas.

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Market Realist

Just released this morning were January sales figures for the US Big Three: Ford, General Motors, and Fiat Chrysler.  General Motors saw January sales jump 18%, Ford saw sales increase 15%, and Fiat Chrysler saw sales increase of 14% (all year over year figures). For Ford, it marks the best January sales period since 2004, thanks to the company’s F-series pickups and the new Mustang.

Overall, AutoNation knocked earnings estimates out of the park and future guidance is very positive.  Sales of new and used cars are very impressive and continue to show that consumers are still in the market to replace their older model cars.  Furthermore, the entire US auto industry saw huge sales bump in January, giving life to AutoNation CEO Mike Jackson’s forecast of 17 million cars sold in 2015.

Disclosure: None