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Lithia Motors (LAD) Up 4.8% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
First Financial Corp. (THFF) delivered earnings and revenue surprises of 20.00% and 3.66%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

It has been about a month since the last earnings report for Lithia Motors (LAD). Shares have added about 4.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Lithia Motors due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Lithia Motors Q1 Earnings Top Estimates, Revenues Miss

Lithia Motors reported adjusted earnings per share of $2.44 in first-quarter 2019, marking an 18% increase from $2.07 in the prior-year quarter. Further, the bottom line beat the Zacks Consensus Estimate of $2.15. This increase was owing to strong performance by the company’s three more profitable business lines, consisting of retail used vehicles, finance and insurance (F&I), and service body and parts.

Reportedly, in the quarter under review, adjusted net income rose 9% year over year to $57 million. Total revenues in the quarter increased 7% year over year to $2.85 billion, narrowly missing the Zacks Consensus Estimate of $2.89 billion.

Gross profit rose 10.4% to $450.7 million in the quarter under review from $408.1 million in the year-ago quarter.

Quarter in Detail

Revenues from new-vehicle retail inched up 0.4% year over year to $1.46 billion in the reported quarter. New-vehicle retail unit sale declined 4.3% to 39,695. The average selling price of new-vehicle retail rose 5% to $36,809 from the year-ago figure.

Used-vehicle retail revenues increased 15.7% year over year to $828 million in the quarter under review while revenues from used-vehicle wholesale rose 1.8% to $77 million. Used-vehicle retail unit sale improved 12.6% to 40,675. The average selling price of used-vehicle retail gained 2.7% to $20,353 million from the year-ago figure.

Revenues from service body and parts went up 11.1% to $317 million. The company’s F&I business recorded 10.3% rise in revenues to $118 million. Revenues from fleet and others were $48.4 million compared with the year-ago figure of $21.2 million.

Financial Details

Lithia Motors had cash and cash equivalents of $45 million as of Mar 31, 2019, up from $31.6 million as of Dec 31, 2018. Long-term debt was $1.3 billion as of Mar 31, 2018, marking a decrease from $1.36 billion recorded on Dec 31, 2018.

Dividend Payment

Lithia Motors’ board approved a quarterly dividend of 30 cents per share for first-quarter 2019. The amount will be payable on May 24, 2019, to shareholders of record as of May 10, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 8.35% due to these changes.

VGM Scores

At this time, Lithia Motors has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Lithia Motors has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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