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AutoNation Q3 Profit Down After Hurricanes

The Fort Lauderdale-based auto dealer will buy back up to $250 million of its common stock to increase earnings per share by reducing the number of shares outstanding.

AutoNation, the largest car dealer in the country, reported that its net income fell to $92.4 million, or 34 cents a share, in the latest quarter, down from $108.8 million, or 38 cents a share, in the same period a year ago. Income from continuing operations fell to $95 million, or 35 cents a share, from $109.5 million, or 38 cents a share, a year ago. That was ahead of Wall Street's average estimate of 34 cents a share.

AutoNation expects fourth-quarter earnings from continuing operations of 30 cents to 33 cents a share, in line with Wall Street expectations. The company also repeated its 2004 earnings estimate of $1.32 to $1.35 a share.

The Florida hurricanes hit AutoNation hard because it has more than 60 dealerships in the state and makes about 30 percent of its profit from sales there. The company is seeing sales rebound in Florida this month, according to Mike Maroone, president and chief operating officer.

Third-quarter revenue fell 0.8 percent to $5.1 million from $5.14 million a year ago.

The company decided to no longer give quarterly or annual per-share earnings targets. Instead, it plans to provide long-term earnings estimates. The auto dealer expects earnings per share to grow 10 percent to 12 percent a year for the long term.

AutoNation managed to trim its inventory level in the third quarter by taking a hard line with auto makers, saying they weren't going to be able to sell at the pace the car companies were rolling out new vehicles, chief executive Mike Jackson said.

At the end of June, AutoNation had a 75-day supply of cars and trucks, and the industry had a 72-day supply. By the end of the third quarter, the company had brought its inventory level down to 53 days, compared with an industry average of 62 days.

High inventory hurt the company in several ways. Its floorplan interest expense, which is the interest dealers pay to the auto makers while they hold unsold cars on their lots, increased from $15.2 million a year ago to $21.4 million in the third quarter. Revenue per new vehicle was down, and so was gross profit, as the company had to bolster automaker incentives with its own money to convince customers to buy cars.

For the first nine months of the year, AutoNation earned $271.8 million, or 99 cents per share, down from $400.1, or $1.39 a share, last year.

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