AN changes
Pick any two versions below to diff them.
- Price
- $161.73 → $187.21(+15.8%)
- Discount category
- Well below intrinsic value → Below intrinsic value
- Next earnings
- Oct 30, 2026 → Jan 30, 2027
- Next earnings is estimate
- No → Yes
- Thesis
- The market prices AutoNation as a dealer whose profits passed their peak. Vehicle profits fall while unit sales fall, and earnings per share grow mainly because the company buys back shares. In removed: Q2 added: Q3 2026, same-store new vehicle unit sales fell 5% and used unit sales fell removed: 8% added: 6% from a year earlier. removed: New vehicle added: Same-store gross profit fell removed: 18%, added: 5%, and adjusted operating income fell 7%. Adjusted EPS still rose 2%, because the diluted share count was removed: 12% added: 13% lower. AutoNation also grows its own loan book, which adds credit risk. For the gap to close, four things must be true. Same-store unit sales must stop falling. After-Sales gross profit must keep growing, as it did with added: a record removed: results in removed: Q2 added: Q3 2026 and removed: 7% added: 6% customer pay growth. AutoNation Finance must keep growing its profit while credit losses stay stable. The covenant leverage ratio must stay near removed: 2.8 added: 2.7 times or lower while buybacks removed: continue. The first evidence comes with added: continue under the removed: Q3 2026 report on added: extra $1.0 billion authorization of October removed: 30, 2026, and then with the added: 2026. The Q4 2026 removed: report added: report, expected in removed: early 2027. added: late January or February 2027, gives the next evidence. The gap depends on the vehicle cycle and on interest rates, so it can close only slowly, over the next two to three years. The main reason it may not close is a longer fall in vehicle demand and dealer margins.
- Risks
- Vehicle unit sales and margins fall. In the first removed: half added: nine months of 2026, same-store new removed: vehicle unit sales fell 7% and used added: vehicle unit sales added: each fell 6% from a year removed: earlier. In Q2 2026, added: earlier, and new vehicle gross profit fell removed: 18%. added: 15%. If demand stays weak, profits from vehicles can fall further. AutoNation Finance adds credit risk. Auto loans receivable rose to removed: $2.59 added: $2.78 billion at removed: June added: September 30, 2026, from $2.14 billion at December 31, 2025, and the provision for credit losses was removed: $40 added: $56.8 million in the first removed: half added: nine months of 2026. Higher loan losses in a weak economy would reduce profit. Debt and interest costs rose. Non-vehicle debt was removed: $4.43 added: $4.34 billion at removed: June added: September 30, 2026, up from $3.98 billion at December 31, 2025, and removed: included $635 added: other interest expense rose to $149.6 million added: in the first nine months of removed: commercial paper. added: 2026 from $133.6 million a year earlier. Floor plan notes for vehicle inventory were another removed: $4.06 added: $4.02 billion. Higher interest rates raise these costs. Cascade Investment owns 21.1% of the shares. One large holder can influence votes, and a large sale of shares could weigh on the price.
- Balance sheet
- Cash: removed: $53M added: $51M Debt: removed: $4.4B added: $4.3B Net debt: removed: $4.4B added: $4.3B Net debt / EBITDA: 2.7× (medium) Interest cover: removed: 6.5× Debt due within 12 months: $710M added: 6.3× AutoNation funds its vehicle inventory with floor plan notes and funds the rest of the business with senior notes, commercial paper and a revolving credit facility. At removed: June added: September 30, 2026, non-vehicle debt was removed: $4.43 billion: $3.72 added: $4.34 billion, against $3.98 billion removed: of long-term debt, $75 million of current maturities and $635 million of commercial paper with a weighted average rate of 4.1%. added: at December 31, 2025. Floor plan notes payable of removed: $4.06 added: $4.02 billion and removed: $2.42 added: $2.59 billion of non-recourse debt that funds AutoNation Finance loans are left out of debt. Liquidity was removed: $1.0 added: $1.5 billion, with removed: $53 added: $51 million of cash and removed: $0.9 added: $1.4 billion available on the revolver after commercial paper. The net leverage figure is the covenant leverage removed: ratio net of cash, 2.7 added: ratio, 2.71 times at removed: June added: September 30, 2026; the covenant limit is 3.75 times. Interest cover is operating income divided by other interest expense for the first removed: half added: nine months of 2026, without floor plan interest and AutoNation Finance interest. The covenant interest coverage ratio was removed: 4.67 added: 4.61 times, against a minimum of 3.00 times. On September 14, 2026, AutoNation raised its revolver to $2.0 billion and extended it to September 2031. added: In October 2026, it raised its commercial paper program to $2.0 billion. The Q3 2026 release does not split non-vehicle debt into notes, commercial paper and current maturities, so no amount due within 12 months is shown. As of removed: Jun added: Sep 30, 2026.
- Checkpoints
- Oct 30, 2026: Q3 2026 earnings: unit sales and vehicle margins. removed: Pending. added: Passed. Watch: A smaller fall in same-store new and used unit sales than in Q2 2026 and growth in After-Sales gross profit pass; a larger fall in units or in adjusted operating income fails. removed: Feb 15, added: Outcome: Same-store used unit sales fell 6% against 8% in Q2 2026, new unit sales fell 5% as in Q2, After-Sales gross profit was a record and adjusted operating income fell 7%, no more than in Q2. Jan 30, 2027 (estimate): Q4 2026 earnings: AutoNation Finance and leverage. Pending. Watch: AutoNation Finance profit that keeps growing with stable credit losses, and covenant leverage at or below 2.8 times, pass; higher credit losses or rising leverage fails.
- Recent events
- Oct added: 30, 2026: AutoNation reported Q3 2026 results. Revenue was $7.0 billion, about the same as a year earlier. EPS was $4.87 against $5.65, and adjusted EPS rose to $5.11 from $5.01, because the diluted share count fell 13%. Same-store new vehicle unit sales fell 5% and used unit sales fell 6%. After-Sales gross profit was a record, and AutoNation Finance income rose to $15.4 million from $1.5 million. AutoNation bought back $620 million of shares in the first nine months of 2026. In October 2026, the Board authorized $1.0 billion more of buybacks, and the company raised its commercial paper program to $2.0 billion. Oct 16, 2026: AutoNation appointed Mark Stewart, the CEO of Goodyear and a former Chief Operating Officer of North America for Stellantis, to its board as an independent director. Oct 12, 2026: AutoNation said that it will report Q3 2026 results before the market opens on October 30, 2026, with a call at 9:00 a.m. ET. Oct 1, 2026: AutoNation appointed Ravi Simhambhatla, formerly Chief Digital and Innovation Officer of Avis Budget Group, as Chief Technology and AI Officer. He leads technology, data science and AI. Sep 14, 2026: AutoNation amended its unsecured credit agreement. The revolving credit facility rose to $2.0 billion from $1.9 billion, the accordion rose to $1.0 billion, and the maturity moved to September 14, 2031. The covenants stay at a maximum leverage ratio of 3.75 times and a minimum interest coverage ratio of 3.00 times. Jul 31, 2026: AutoNation reported Q2 2026 results. Revenue fell 1% to $6.9 billion. EPS was $5.39, and adjusted EPS was $5.56 against $5.46 a year earlier. Same-store new vehicle unit sales fell 5% and used unit sales fell 8%. After-Sales gross profit was a record, and the AutoNation Finance loan portfolio grew to $2.7 billion. In June, AutoNation bought a Toyota store near Atlanta and three Premium Luxury stores in the San Francisco Bay area, with about $600 million of annual revenue. May 5, 2026: Cascade Investment, controlled by Bill Gates, reported that it owns 7.06 million AutoNation shares, or 21.1% of the shares. The percentage rose because AutoNation's buybacks reduced the share count, not because Cascade bought shares. May 1, 2026: AutoNation reported Q1 2026 results. Revenue fell 2% to $6.6 billion. EPS was $5.85, and adjusted EPS was $4.69 against $4.68 a year earlier. AutoNation bought back shares for $300 million in the quarter, about 4% of the share count.