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Friday July 29

AutoNation More Than Doubles Q2 Profit

AutoNation Inc., the biggest U.S. car dealer, has announced that its second-quarter profit more than doubled from higher car sales and a hefty gain after resolving a tax audit.

Last quarter, the company earned $194.8 million, or 73 cents per share, up from $92.1 million, or 34 cents, the year before. The results included a gain of 36 cents per share on discontinued operations from the tax resolution, AutoNation said.

Income from continuing business amounted to $105.8 million, or 40 cents per share, above the average estimate of 39 cents from analysts surveyed by Thomson Financial.

Revenue totaled $5.04 billion, up 4 percent from $4.84 billion a year earlier but falling short of analysts' consensus target of $5.2 billion. At locations open at least a year, quarterly sales increased 3.3 percent.

Sales of new vehicles advanced 3 percent to $3.05 billion, while used-vehicle sales expanded 6 percent to $1.14 billion. Revenue from parts and service rose 8 percent to $658.3 million, the company added.

Chairman and Chief Executive Mike Jackson said AutoNation was able to grow from the year-ago period despite a sales slump effecting the entire auto industry, as well as steep new car incentives that cuts into profits. The industry has been hurt in the past year as new car buyers have put off purchases because of rising interest rates and skyrocketing gas prices.

He said the company has seen capital spending increases from companies pick up the slack. In addition, Jackson said he believes the industry will still achieve production of between 16 million and 17 million units this year.

"If you look at the year, the industry from a retail perspective is down by about 5 percent," he said. "Incentives and value pricing have closed millions of deals, but still retail is down and it's the capital spending that's keeping the industry figures up."

He could not predict when consumers might get back into the buying mood. However, Jackson said he believes the profit and revenue growth from the second quarter can be sustained because the economy continues to be strong.

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