May 6, 2018

Friday was a strong day in the markets although AutoCanada was a notable exception.

The S&P 500 was up 1.3% and Toronto was up 0.7%.

CN Rail was up 2.2%, Linamar was up 2.1%.

AutoCanada was down 10.4% after releasing earnings. The quarter was definitely weak. But there are a lot of moving parts to try to understand. On a same store basis the results were up slightly versus last year.  But overall the gross profit was down about 7% and adjusted earnings (depending on the adjustments made) were way down.

Part of the weaker numbers, at least on the top line as in total revenue, was because of a complicated transaction with its founder and former CEO that resulted in AutoCanda effectively selling a few dealerships. But it was not clear why the overall result was weak when the same-store results (which account for 49 out of 54 dealerships) were slightly positive.

It may also be that a couple of its newest dealerships either recently acquired or especially newly opened were a drag on earnings which is normal for new dealerships in the first couple of years.

Overall I think AutoCanada failed to explain very well at all the reasons for the poor results in Q1.

Weather did play a part. I know that March in Alberta was FAR colder than normal. Spring was very late in arriving.

I am working on an update for this company. I added to my position on Friday. Q2 will show an increase in sales due to its latest acquisitions. But that could also come with unusual expenses in Q2 and I believe the weather in April in most of Canada was worst than normal.

Meanwhile oil prices are up on Sunday evening to $70.20 for West Texas Intermediate. Hopefully breaching the $70 mark will generate some confidence in Alberta.