AutoNation Leads Automobile Dealers in 1Q Earnings Gains

AutoNation Inc. (NYSE: AN), Penkse Automotive Group Inc. (NYSE: PAG) and Sonic Automotive Inc. (NYSE: SAH), the three largest U.S. automobile dealer groups, each reported profit growth in the first quarter, reflecting strong North American car sales..

AutoNation, the largest dealer group in the U.S. according to Automotive News, reported earnings per share rose 22 percent to 56 cents over the year-earlier quarter, while Penske Automotive and Sonic Automotive, the No. 2 and No. 3 companies, also posted big gains in earnings. AutoNation's revenue rose 10 percent to $3.7 billion.

Penske's income jumped 41 percent to 55 cents a share and Sonic Automotive's income rose 22 percent to 33 cents. Revenue at Penske was $3.2 billion, up nearly 18 percent. Sonic revenue was $1.99 billion, up 9.3 percent.

All three companies benefitted from strong U.S. auto sales in the first quarter, which rose 7 percent, according to CNW Research.

The renaissance in auto retail is well underway, reflected in a seasonally adjusted U.S. industry annual selling rate of 14.5 million units for the first quarter of 2012. The American consumer has more choices than ever with improved fuel efficiency, better technology and accelerated product offerings ... we see continued momentum in U.S. auto sales, Mike Jackson, Chairman and CEO of AutoNation in Fort Lauderdale, Fla., said Wednesday.

Penske Saw Non-U.S. Gains

Penske Automotive, based in Bloomfield Hills, Mich., also reported international revenue increased 5.9 percent despite European economic turmoil. Sonic, based in Charlotte, N.C. said its most profitable business was parts, service and collision repair, with a gross margin of 48.7 percent, compared with only 6.1 percent for new vehicles and 7.8 percent for used ones.

U.S. auto sales were the main driver for profits at the three companies, though, and they beat predictions by both J.D. Power and Associates and Kelley Blue Book for the first quarter, for a seasonally adjusted annual rate of 11.7 million retail vehicles and 14.5 million overall light-vehicle sales.

It was a very, very strong quarter ... demand is very, very strong from consumers, Alec Gutierrez, senior market analyst of automotive insight for KBB, said Monday.

As a result, KBB raised its sale forecast to between 14 and 14.2 million vehicles for the year, reflecting an expected moderation in sales beginning in the second quarter. Strong first-quarter sales were in part a result of pent-up demand. Poor inventory levels in the fourth quarter of 2011 led many buyers to delay new car purchases until 2012.

Subcompact sales paved the way for sales in the U.S. during the first quarter, increasing 37 percent to a total market share of 4.4 percent (up from 3.5 percent). Likewise, midsize cars gained 26.8 percent for a market share of 15.4 percent. More expensive and less fuel-efficient luxury cars and CUVs lost sales during the quarter.

AutoNation shares fell 35 cents percent to $33.23 on Wednesday. Penske shares rose 28 cents percent to $26.83, while Sonic shares closed at $17.05, up 14 cents. All three are near their 52-week highs.