Shareholders might have noticed that Lithia Motors, Inc. (NYSE:LAD) filed its third-quarter result this time last week. The early response was not positive, with shares down 8.9% to US$250 in the past week. It looks like a credible result overall - although revenues of US$3.6b were in line with what the analysts predicted, Lithia Motors surprised by delivering a statutory profit of US$6.86 per share, a notable 10% above expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the latest results, Lithia Motors' ten analysts are now forecasting revenues of US$17.6b in 2021. This would be a sizeable 41% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 26% to US$19.17. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$16.4b and earnings per share (EPS) of US$17.83 in 2021. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
It will come as no surprise to learn that the analysts have increased their price target for Lithia Motors 7.0% to US$307on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Lithia Motors, with the most bullish analyst valuing it at US$350 and the most bearish at US$250 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Lithia Motors' rate of growth is expected to accelerate meaningfully, with the forecast 41% revenue growth noticeably faster than its historical growth of 11%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.1% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Lithia Motors is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Lithia Motors' earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Lithia Motors analysts - going out to 2022, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Lithia Motors that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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