AutoNation says 2nd-quarter net income climbs as new and used auto sales recover

Auto sales recovery pushes AutoNation 2Q higher

NEW YORK — A thawing market for auto loans helped customers buy more cars and trucks in the second quarter, lifting AutoNation’s net income by nearly 30 percent, the country’s largest dealership chain said Thursday.

The company, which owns 249 dealership franchises in 15 states, said new cars are selling for about $1,000 more on average than they did at the same time last year. Sales in the “ground zero” states of the housing meltdown — Florida and California — are up 20 percent, he said.

“Compared to a year ago, the biggest difference is the credit environment,” CEO Mike Jackson said in an interview. “This year we have credit for our customers. Last year we did not, and that’s what led to the downturn in sales.”

The results, which beat Wall Street expectations, are encouraging for an auto industry that has been faced with an uncertain recovery in sales this year. Americans have been buying more cars and trucks this year versus a dismal 2009, but sales have been fitful in recent months.

But the frozen credit markets, one of the biggest factors keeping consumers from buying new autos last year, have shown signs of thawing recently. The auto loan approval rate for customers with the highest credit scores was 90 percent in June after sliding to 70 percent in late 2008 during the recession, according to CNW Market Research. Customers with mid-tier and subprime credit are also getting a reprieve.

On Thursday, General Motors Co. announced it was buying lender AmeriCredit Corp., which specializes in subprime lending and leases, so it can better reach that segment of the market.

Jackson said he expects sales to continue climbing in the third quarter, despite the absence of the highly successful Cash for Clunkers program that sent sales soaring in the year-ago period.

“This is a real, genuine recovery in the auto industry,” Jackson said.

Shares rose $1.21, or 5.7 percent, to $22.50 in afternoon trading after hitting a 52-week high of $22.69 earlier in the session.

AutoNation, based in Fort Lauderdale, Fla., posted net income of $47.2 million, or 29 cents per share, for the three months ended June 30, up from $36.7 million, or 21 cents per share, a year ago. Excluding items, the dealership chain earned 39 cents per share. The items included a $12 million debt refinancing charge and a $4 million gain on asset sales.

Revenue rose 20 percent to $3.11 billion. Revenue from new cars, which accounts for the most of the company’s sales, rose 24 percent to $1.66 billion. Used car revenue climbed 25 percent to $785.3 million.

The company also makes money from parts and service and financing and insurance. Revenue in those segments also rose.

Analysts surveyed by Thomson Reuters expected earnings of 36 cents per share on $3.06 billion in revenue, on average. Such estimates typically exclude one-time items.

Automakers have been posting higher sales in 2010, but the pace of recovery has slowed in recent months amid fears of a double-dip recession. Industry sales are up 17 percent for the first six months of the year.

Most analysts and automakers expect full-year sales of between 11.5 million and 12 million cars and trucks. That’s an improvement from the historic low of 10.4 million last year, but still well below the record high of more than 17 million in 2000.

Jackson said he expects new vehicle sales of 11.5 million in 2010, standing by a previous forecast.