AutoNation Earnings: CDK Cyberattack Takes Away From a Good Period

AutoNation’s second quarter saw about $1.55 of lost earnings per share from the cyberattack on dealer management system vendor CDK, which started June 19 and lasted into early July. CDK’s systems are now fully operational in AutoNation’s stores, but the firm took a special item pretax charge of $42.8 million ($0.79 per share) to compensate salespeople for lost business and to foster retention. We believe the remaining roughly $0.76 of lost EPS can mostly be made up this year as sales catch up from the cyberattack, but lost service business mostly cannot be recovered. Adjusted diluted EPS of $3.99 missed the LSEG consensus of $4.34 and fell 36.6% year over year. Some of this decline is CDK-related, but dealers’ profits are also normalizing following inflated new vehicle profitability during the chip shortage in the past few years.