AutoCanada Inc. (TSX:ACQ) is an Edmonton-based company that operates franchised car dealerships. The stock was up 5.08% in early afternoon trading on March 19. Shares are still down 8.8% in 2018 thus far. AutoCanada released its 2017 fourth quarter and full-year results on March 15.
AutoCanada reported record revenue of $3.1 billion in 2017 – up 7% from 2016. Canadian automobile sales hit a record 2.04 million in 2017. Vehicle sales have also started well in 2018, with record numbers reported in January and February so far. For AutoCanada, sales of new vehicles were up 9.3% in 2017 to 43,773 and used vehicle sales dropped 1% to 19,379. New vehicle sales accounted for 58.9% of total revenue at AutoCanada.
The light truck segment has continued to dominate growth for automobile sales in Canada and the United States. Car sales were down 6% year over year in February while light trucks jumped 5.6% from the prior year. Consumers are also starting to feel the crunch of higher interest rates and a tightening credit environment. Auto loans have ballooned to record highs in the U.S. and Canada, and it remains to be seen whether the industry can keep up this kind of growth going forward.
AutoCanada announced a dividend of $0.10 per share representing a 1.9% dividend yield. Things are looking promising for automobile dealers to start 2018, and the response to AutoCanada’s recent earnings reflect that. Investors should still be cautious with an industry that is particularly vulnerable to economic downturns and a potential credit crunch.
