AutoNation EPS Jumps 37 Percent in Q2 | The Motley Fool

AutoNation (AN 1.69%), one of America’s largest automotive retailers, released its Q2 2025 results on July 25, 2025, covering the period ending June 30. The headline news: adjusted earnings per share (Non-GAAP) rose sharply to $5.46, well ahead of the analyst estimate of $4.70 (non-GAAP). Revenue (GAAP) came in at $7.0 billion, up 8% from the same quarter last year, beating forecasted expectations, with non-GAAP EPS of $5.46 exceeding the analyst estimate of $4.70 and GAAP revenue of $6,974.4 million exceeding the analyst estimate of $6,847.4 million. However, GAAP net income dropped 34% due to significant non-cash impairment charges related to goodwill and franchise rights. Stripping out these one-time items, underlying performance was strong thanks to growth in After-Sales, Customer Financial Services, and disciplined cost control. The quarter highlighted progress on strategic priorities and the company’s ability to deliver growth even as core new vehicle margins trended lower.

Source: Analyst estimates for the quarter provided by FactSet.

Company Overview and Recent Focus Areas

AutoNation operates a nationwide network of franchised automotive dealerships, offering new and used vehicle sales, automotive parts and services, and customer financing and insurance products. Its diversified business model helps balance revenue across vehicle sales, ongoing service work, and financial services.

In recent years, AutoNation has focused on strengthening its mix of revenue sources beyond new and used vehicle sales. The After-Sales segment, which covers parts, service, and repairs, is now a key profit driver. The company is also expanding its captive finance business, AutoNation Finance, allowing it to offer more in-house loans and insurance. These areas are strategically important to mitigate fluctuations in car sales volume, and to build deeper customer relationships. Success depends on growing these segments, controlling operational costs, and maintaining compliance in a heavily regulated industry.

Quarterly Highlights and Business Performance

During the period, both new and used vehicle sales volumes increased. New vehicle revenue grew to $3.4 billion, up 9%, reflecting an 8% increase in same-store unit sales. However, Gross profit per new vehicle sold declined by 10.4% year over year, falling from $3,108 to $2,785.

Used vehicle revenue reached $2.0 billion, up 4%. The company sold 69,736 used vehicles—a 6.5% increase. Gross profit per used vehicle was stable, dipping slightly to $1,622 from $1,638 in Q2 2024. Management noted that demand remained strongest for lower-priced models, and internal sourcing efforts, like the “We’ll Buy Your Car” program, continued to support used inventory availability.

The After-Sales business delivered 13% higher gross profit, reaching $594 million (GAAP). This segment now drives 46.9% of total company-wide gross profit. AutoNation continues to make technician hiring and internal development a key priority to address capacity constraints. Productivity gains in this area—like higher service ticket values and increased technician efficiency—contributed to the strong performance.

Customer Financial Services, which packages loans, insurance, and extended warranties, also grew strongly. Gross profit per vehicle sold in this segment rose from $2,561 to $2,711, as penetration rates stayed above 70%. The captive finance business originated more loans, and AutoNation completed a $700 million asset-backed securitization. This financing approach allows the company to fund its growing loan book.

On a segment basis, all vehicle franchise categories reported higher operating income (non-GAAP): and Premium Luxury climbed 27%. AutoNation Finance income also rose, driven by portfolio growth. Instead, the company focused on optimizing previously acquired stores and integrating operations, particularly in Colorado. Management continues to weigh share repurchases against pursuing new acquisitions, depending on market opportunity.

Cost discipline was evident: Adjusted selling, general, and administrative expense as a percentage of gross profit improved by over 1 percentage point from the prior year. This helped offset the margin squeeze in new vehicle sales. Despite these improvements, GAAP operating income and net income declined due to a $123 million non-cash impairment charge.

Looking Ahead: Guidance and Key Watchpoints

Management did not issue formal forward guidance for the next quarter or for fiscal 2025 in its earnings release. Leadership reiterated its focus on growing After-Sales and Customer Financial Services, expanding its captive finance arm, and returning capital to shareholders through share repurchases. The company remains mindful of risks from ongoing tariff uncertainty and price normalization in the vehicle market. In the Q&A, executives noted that they have modeled downside tariff scenarios and are prepared to maintain capital return programs even under less favorable industry conditions.

For upcoming quarters, investors should monitor changes in new vehicle unit margin, trends in used vehicle pricing, and performance metrics in AutoNation Finance—such as loan growth, net interest margin, and provision for credit losses. The company’s balance sheet remains strong, with $1.8 billion of liquidity and a conservative leverage ratio as of June 30, 2025, giving flexibility for potential acquisitions or continued buybacks if conditions warrant. The company’s future profitability and growth will depend on the continued strength of After-Sales and financial services, disciplined operating costs, and effective management of evolving industry dynamics.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.