Zacks Investment Ideas feature highlights: Lithia Motors, Asbury Automotive Group and Autonation
CHICAGO, May 8, 2013 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Lithia Motors (NYSE:LAD), Asbury Automotive Group (NYSE:ABG) and Autonation (NYSE:AN).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
Auto Retail Stocks: Too Good to Be True?
Could an investment be too good to be true?
Lost amidst the earnings reports by such investor favorites as Apple and Procter & Gamble were the earnings reports of the auto retailers.
I'm not talking about the auto manufacturers like Ford and Toyota. I'm talking about the retailers who simply sell, and in many cases, repair, cars and trucks. I was surprised to learn that a handful of these companies are publicly traded and that some of the retailers have dealerships all across the country.
A bunch of them recently reported earnings and they didn't just have good quarters, they had unbelievable quarters. They had the kind of quarters most businesses only dream about.
Auto Sales Returning To "Normal"
But how is that possible more than three years into the auto recovery? It's not as as if auto sales haven't been rising the last few years. Car sales bottomed in 2009 at 10.4 million and have been steadily rising ever since. Automobile analysts expect 2013 sales of 15.1 million. That is near a "normal" auto sales market for the United States.
But a perfect combination of improving credit availability with zero down loans, pent up demand from buyers driving older cars for longer than they otherwise would have, and a housing market recovery fueling pick-up sales, has resulted in the best of times for the retailers.
Three Auto Retail Stocks With the Best Fundamentals
Even though the auto stocks have had big run-ups, it's not too late to get into the sector. Valuations are still attractive. The companies are also expected to have double digit earnings growth this year as analysts expect the growth to remain through 2013 and possibly into 2014.
It doesn't get much better than buying both solid fundamentals and big earnings growth.
However, not all of the auto retailers are created equal. These three auto retailers have the best combination of fundamentals and the Zacks Rank in the sector. All three are Zacks Rank #2 (Buy) stocks.
- Lithia Motors Inc.
- Asbury Automotive Group
- Autonation Inc.
1. Lithia Motors (NYSE:LAD)
Lithia Motors is the 9th largest auto retailer in the United States with 88 stores in 11 states. It has both rural and urban stores which allows it to be a good indicator of what is happening in the overall economy.
On Apr 24, it beat the Zacks Consensus Estimate by 16%. Same store sales growth was phenomenal, growing by 18.8%. New cars same store sales jumped 22% while used car same store sales rose 21.5%.
Heck, even Service, Body & Parts was strong, with same store sales up 7%.
Lithia also guided higher, the 13th consecutive quarter it has done so.
Forward P/E= 13.7
Expected EPS growth in 2013= 22%
Zacks Rank #2 (Buy)
2. Asbury Automotive Group (NYSE:ABG)
Asbury Automotive is among the largest auto retailers with 76 auto retail stores across the United States.
On Apr 24, it reported its fourth consecutive record quarterly results. Like Lithia, new and used car sales were strong. New car same store sales jumped 13.9% and used car same store sales rose 14.4%.
Forward P/E= 13.3
Expected EPS growth in 2013= 15.8%
Zacks Rank #2 (Buy)
3. Autonation (NYSE:AN)
Autonation is the largest of the auto retailers with 262 new vehicle franchises in 15 states. It recently began a rebranding campaign to bring all of its stores under the Autonation brand. It has completed 30% of the rebranding.
New car same store sales rose 6% while used car same store sales increased 6.7%.
Forward P/E= 15.2
Expected EPS growth in 2013= 12.1%
Zacks Rank #2 (Buy)
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.
Then when changes are discovered, they're applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock picking system; the Zacks Rank, continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros. In short, it's your steady flow of profitable ideas GUARANTEED to be worth your time. Get your free subscription to Profit from the Pros at: http://at.zacks.com/?id=7298
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
SOURCE Zacks Investment Research, Inc.
Share this article