As the country's leading auto retailer, AutoNation
Blaming a disheartening lower sales volume than the company expected, AutoNation is now looking to earn between $0.34 and $0.35 a share by the time it is done crunching its June quarter numbers. Three months ago, its projections were as high as $0.40 a stub.
The company is also naming names, singling out June weakness at its Ford
Shouldn't an improving economy mean a surge in big-ticket item sales? Well, let's be realistic. The industry has been giving itself away with consumer-friendly 0% financing rates for over a year now. That gave hesitant buyers every reason to trade in their ride despite the hiccups in the economy. That probably drained the pool of potential new car buyers under more prosperous times like now, providing a cruel twist to the sector's typical cyclical ways.
AutoNation is now trimming its full-year earnings-per-share expectations to no more than $1.40. While that still has the stock at a reasonable valuation (selling at just 12 times this year's earnings), with 365 dealerships, lowering its guidance isn't just about the valuation of one company. If the car industry is downshifting as a whole, AutoNation hitting the brakes may send more than a few key domestic players scrambling.
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Longtime Fool contributor Rick Munarriz is happy with his car, but figures that his wife may be in the market for a different set of wheels over the next year. He does not own shares in any companies mentioned in this story.