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Investing.com -- AutoNation, Inc. (NYSE:AN) reported third quarter earnings that beat analyst expectations, but shares tumbled 7.9% in premarket trading Thursday as investors focused on shrinking new vehicle profit margins.
The automotive retailer posted adjusted earnings per share of $5.01, exceeding the analyst estimate of $4.84, while revenue rose 7% YoY to $7.04 billion, surpassing the consensus estimate of $6.8 billion. Despite the top and bottom line beats, new vehicle gross profit fell by $27 million as per-unit profitability dropped to $2,290 from $2,820 a year ago, offsetting a 4% increase in unit sales.
"We are pleased to report another quarter of strong performance, with robust growth across the business, including record profit in After-Sales and Customer Financial Services," said Mike Manley, Chief Executive Officer of AutoNation.
The company’s overall revenue growth was driven by increases across all major categories. Same-store revenue increased 6% to $6.9 billion, with new vehicle revenue up 7% to $3.4 billion and used vehicle revenue rising 5% to $2.0 billion. Customer Financial Services revenue grew 11% to $368 million, while After-Sales revenue increased 6% to $1.2 billion.
AutoNation’s After-Sales business showed particular strength, with gross profit increasing 7% to $589 million and gross margin expanding 100 basis points to 48.7%. Customer Financial Services achieved record gross profit of $375 million, up 12% from the prior year.
During the quarter, the company repurchased 0.8 million shares for $181 million at an average price of $217 per share. AutoNation also expanded its footprint by acquiring Audi and Mercedes-Benz dealerships in Chicago, following earlier acquisitions in Denver, representing more than $500 million in combined annual revenues.
The company maintained strong liquidity with $1.8 billion available at quarter-end, including $98 million in cash and $1.7 billion in revolving credit facility availability.
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