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Lithia (LAD) Expands Network on 2 Southern California Stores' Buyout

Lithia Motors, Inc. LAD recently announced the acquisition of two luxury dealerships in Van Nuys, CA, being BMW of Sherman Oaks and Acura of Sherman Oaks. Both stores serve the greater Los Angeles area.

The transaction has expanded Lithia’s footprint to Southern California as the BMW store is Lithia’s first store in Southern California. Moreover, the buyout is anticipated to add $185 million in combined annualized revenues. The transaction has been financed through existing on-balance sheet capacity.

Lithia is highly optimistic about this buyout. These franchises would perfectly supplement the company’s existing product portfolio. In fact, the buyout aligns with Lithia’s plan to fortify the reach and density of its network to serve customers more conveniently. In addition, BMW’s unparalleled commitment to providing the highest level of customer service will further enhance Lithia’s offerings.

Lithia had earlier announced a five-year plan to yield $50 billion in revenues and $50 in earnings per share. Since the plan’s roll-out, the retailer has achieved $7.1 billion in total expected annualized revenues acquired. The company is well ahead its schedule of network expansion per management’s five-year plan. Lithia’s buyouts are, in fact, primarily focused in the Southeast and Central regions where its existing network distribution is the lightest.

The company’s expanding network density is essential to conveniently and affordably cater to customer needs throughout the vehicle ownership lifecycle.

Lithia is one of the leading automotive retailers of new and used vehicles, and related services in the United States. It offers tailored services complemented through its nationwide network. The buyout of the two dealerships is in sync with the auto retailer’s proven success strategy of acquiring strong, high-performing franchises.

Lithia’s diversified product mix and multiple streams of income reduce the risk profile of the firm. The company generates income from businesses, including used and new vehicle retail, finance, insurance, as well as automotive repair and maintenance. The diversified portfolio positions it well for top- and bottom-line growth.

Lithia currently carries a Zacks Rank #3 (Hold). The company put up a stellar show in the first quarter of 2021, delivering earnings of $5.89 per share, up a whopping 193% from the year-ago level.

Shares of the company have surged 163% in the past year compared with the industry’s rally of 130.8% during the same period.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Key Picks

Better-ranked stocks in the auto space include American Axle AXL, BMW AG BAMXF, and Harley-Davidson HOG, each sporting a Zacks Rank #1 (Strong Buy).

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