AutoCanada Inc. (TSX:ACQ) is an Edmonton-based company that owns and operates franchised automobile dealerships. AutoCanada stock was down 0.99% in early afternoon trading on February 26. Shares have declined 7.1% in 2018 thus far.
The company is expected to release its 2017 fourth quarter and full-year results in March. In the third quarter revenue was up 10.8% to $834.6 million from Q3 2016. New and used vehicle sales were up 9.4% and 2.9%, respectively, year over year. Gross profit also jumped 12.2% to $138 million. The company declared a solid dividend of $0.10 per share representing a 1.9% dividend yield.
In 2017 Canadian automobile sales surpassed the 2 million mark for the first time in history. This was bolstered by an incredible performance in the light truck segment, which mirrored the same trend seen in the United States. The light truck segment accounted for 68.6% of the market share which was up 8.7% from the prior year. Passenger car sales fell to the lowest level since the mid-1960s.
With this in mind, there is reason for optimism regarding Q4 and full-year results at AutoCanada. However, analyst skepticism remains with regards to the automobile industry at large and factors that could cause downward pressure for the industry. Some of these include rising interest rates which will put the squeeze on Canadian consumers who are already carrying record debt. Automobile loans have also grown considerably since the 2007-2008 financial crisis.
AutoCanada may be a decent bet in the short-term to get a boost from its fourth quarter and full-year earnings, but investors should be prepared to see automobile sales shrink in 2018.
