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Major Franchise Auto Dealers' 2027 Earnings Could Take Hit if Downside Scenario Plays Out, UBS Says
US Markets

Major Franchise Auto Dealers' 2027 Earnings Could Take Hit if Downside Scenario Plays Out, UBS Says

Major US franchise auto dealers could face earnings pressure next year if a downside scenario plays out amid a "relatively muted" growth backdrop, UBS Securities said Monday.The downside scenario is based on the brokerage's recent discussions with investors. It includes, among other things, expectations for new and used unit growth to be flat into 2027, compared with consensus views of a gain of 3% and 4%, respectively, for the group in UBS's coverage.Other key input includes parts and service growth outlook of 2% next year versus the consensus for an increase of 5% for the group, according to UBS. The analysis covers AutoNation (AN), Sonic Automotive (SAH), Asbury Automotive Group (ABG), Lithia Motors (LAD), and Group 1 Automotive (GPI).Using these assumptions, UBS sees potential downside to 2027 consensus earnings per share views between 6% and 10% for the group, if the downside scenario were to play out, the brokerage said in a note to clients."Consensus has units higher in both new and used for the group in 2027 in what some expect to be a relatively muted growth environment," UBS analysts Robert Saltzman and Joseph Spak said, adding that parts and service growth could also slow from mid-single-digit levels after "significant warranty tailwinds" in recent years.Same-store new and used vehicle sales have underperformed US light vehicle and used retail sales by about 3% each over the past few quarters, according to the note.The structural durability of backend operations like parts and service, as well as financing and insurance remains underappreciated, though dealers will need improving unit sales and stronger service growth to boost investor confidence, UBS said."Given where multiples are currently trading after the (nearly) 2 weeks post-EPS sell-off, we believe a lot of this pessimism is currently priced in," Saltzman and Spak wrote. "We acknowledge there are a variety of ways to offset these potential headwinds, including (selling, general, and administrative) cost improvements, accretive M&A, (and) share repurchases to support EPS growth."UBS expects AutoNation to be the least affected by the scenario, while Sonic Automotive appears the most vulnerable."We continue to prefer idiosyncratic stories tied to growth and strong buybacks to support EPS in the current operating environment," the brokerage said.Price: $207.07, Change: $-2.35, Percent Change: -1.12%

$ABG$AN$GPI$LAD$SAH
Stocks Rise Pre-Bell as Amazon Results Lift AI Trade Sentiment
US Markets

Stocks Rise Pre-Bell as Amazon Results Lift AI Trade Sentiment

The benchmark US stock measures were tracking in the green before the open Friday as Amazon's (AMZN) better-than-expected quarterly results improved sentiment around the artificial intelligence trade.The S&P 500 rose 0.4%, the Dow Jones Industrial Average increased 0.5% and the Nasdaq gained 1.1% in premarket activity. The indexes finished the previous trading session up, with the Nasdaq snapping a six-day losing streak and recording its biggest single-day percentage gain since June 15.Shares of Amazon rose 13% pre-bell after the e-commerce giant reported second-quarter earnings above Wall Street's estimates amid a 37% jump in its Amazon Web Services cloud computing business."Amazon's (second-quarter) print was exactly what bulls wanted," RBC Capital Markets said in an emailed client note on Friday. "AWS's accelerating 37% growth beat the bogey, the backlog meaningfully accelerated and AWS's margin flow-through would suggest AI may not be the (return on investment) depressant it's been made out to be."Apple (AAPL) fell 7.1% early Friday as the company missed market estimates for iPad and services revenue in its fiscal third quarter. The tech giant recently increased prices for MacBooks and iPads amid surging memory and storage chip costs.Meta Platforms (META) rose 1.9% while Microsoft (MSFT) was down 0.5% following a 16% jump at the close of Thursday trading. Social media platform Reddit (RDDT) fell 9.3% following its latest quarterly results.Government data on Thursday showed that the US personal consumption expenditure price index decreased 0.1% month over month in June, marking the first decline since April 2020. A separate report showed that US economic growth slowed more than expected in the second quarter, though consumer spending seemed to shrug off intensifying price measures.Treasury yields were trending higher in premarket action, with the two-year rate increasing 2.7 basis points to 4.26% and the 10-year rate adding 0.6 basis points to 4.67%.Iran's army said Friday that it launched strikes on strategic US assets and military bases in Kuwait and Bahrain, following Washington's attack against Iran earlier in the week, CNBC reported, citing state media.Saudi Arabia on Thursday reportedly proposed to form a naval alliance to protect key shipping routes in the Red Sea and Strait of Hormuz, with Iran and its Houthi allies in Yemen continuing to attack vessels amid the ongoing conflict with the US. About 40 countries attended a meeting to discuss strengthening maritime cooperation, the Saudi Defense Ministry reportedly said.West Texas Intermediate crude oil was up 0.4% at $83.93 a barrel before the opening bell, while Brent advanced 0.7% to $89.53.Oil giants ExxonMobil (XOM) and Chevron (CVX) report their latest financial results before the bell, along with AbbVie (ABBV), Colgate-Palmolive (CL), Moderna (MRNA), Magna International (MGA) and AutoNation (AN).Friday's economic calendar has the Chicago purchasing managers' index for July at 9:45 am ET, followed by the final University of Michigan consumer sentiment report for the same month at 10 am. The weekly Baker Hughes oil-and-gas rig count is out at 1 pm.Gold declined 1.2% to $4,113 per troy ounce, while bitcoin shed 1.6% to $63,713.

Dow JonesNasdaq CompositeS&P 500$AAPL$ABBV$AMZN$AN$CL$CVX$META$MGA$MRNA$MSFT$RDDT$XOM
Research

UBS Initiates Coverage on AutoNation With Buy Rating, $234 Price Target

AutoNation (AN) has an average rating of overweight and mean price target of $243.55, according to analysts polled by FactSet.

$AN
Research

Research Alert: CFRA Reiterates Strong Buy Opinion On Shares Of Autonation, Inc.

CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:We lower our 12-month price target by $15 to $250, based on a 2027 P/E of 10.4x, a premium to historic averages justified by market conditions we consider early cycle. We lower our adjusted EPS estimates to $21.65 from $22.30 for '26 and to $24.00 from $24.20 for '27. Following its Q1 earnings beat, we are reiterating our Strong Buy opinion but lowering our estimates and price target on AN. The company continues to execute, as the quarter represented AN's sixth consecutive earnings beat. We were encouraged to see a significant uptick in the company's share repurchases, as AN bought back $300M of stock in Q1, thereby retiring 4% of total outstanding shares (an increase from its average quarterly buybacks of ~$196M in 2025). AN remains one of our top picks in auto retail, with its EPS-boosting buybacks and accretive bolt-on acquisitions likely to result in stronger growth relative to industry peers. While the fundamental environment remains challenging, we see significant upside over the next few years.

$AN
Research

Research Alert: An: Another Earnings Beat Fueled By Margins; Buybacks Continues

CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:AutoNation (AN) posted Q1 adjusted EPS of $4.69 vs. $4.68, ahead of the $4.61 consensus. Net sales fell 2% to $6.55B ($100M below consensus) and gross margin expanded 30 bps to 18.5% (40 bps ahead of consensus). The decline in revenue primarily reflected pressure in new vehicle unit sales, as same-store unit sales declined 9% for new vehicles and 5% for used vehicles. AN repurchased 1.5M shares for $300M in Q1, representing a 4% quarterly share count reduction. So far in Q2 (through April 29), AN has bought back an additional 0.4M shares for $91M, leaving $685M on its share repurchase authorization. At the end of Q1, AN possessed cash and equivalents of $66M, up slightly from $59M at year-end 2025. Total liquidity stood at $1.6B at quarter-end. Non-vehicle debt of $4.12B was up from $3.98B at year-end 2025. The quarter represented AN's sixth consecutive earnings beat. While its top line came in a bit light, margins exceeded expectations and AN continues to shrink its share counts through aggressive buybacks.

$AN
Wire

Auto Dealers Seen Facing Weaker Q1 on Weather Disruption, BofA Says

The automotive dealership industry is expected to see a weaker Q1 performance due to weather disruptions and softer vehicle sales, BofA Securities said in a note on Monday.The firm said Q1 earnings per share estimates for Asbury Automotive (ABG), AutoNation (AN), Group 1 Automotive (GPI), Penske Automotive (PAG), Sonic Automotive (SAH), and Lithia Motors (LAD) have been reduced by an average of 13%. This mainly reflects weather disruptions in late January and February, which affected both vehicle sales and parts and service.Same-store new unit sales are now expected to decline by 5.4% on average, also due to tough comparisons from pre-buying ahead of tariffs implemented at the end of March 2025, BofA added.For Q2, same-store new unit sales are projected to decline by 1.8% on average, again reflecting difficult comparisons from April of last year due to pre-buying before tariff-related price increases. Key risks to recovery include lower consumer confidence linked to the Iran War and higher gas prices, which historically affect US auto sales.The firm added that AutoNation remains a top pick heading into earnings, as its store footprint was less affected by weather disruptions. There is also potential upside to EPS from share buybacks, which may offset higher selling, general, and administrative expenses.BofA lowered price targets of Asbury Automotive to $238 from $255, Group 1 Automotive to $390 from $430, Lithia Motors to $320 from $335, and Penske Automotive to $185 from $200.Price: $197.68, Change: $-2.85, Percent Change: -1.42%

$ABG$AN$GPI$LAD$PAG$SAH

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