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Lithia Motors (LAD) Down 4.5% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Lithia Motors (LAD). Shares have lost about 4.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lithia Motors due for a breakout? 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 Q2 Earnings & Sales Top Estimates, Up Y/Y

Lithia Motors, Inc. reported adjusted earnings per share of $2.95 in second-quarter 2019, marking a 17% increase from the prior-year quarter’s $2.52. Further, the bottom-line figure beat the Zacks Consensus Estimate of $2.87. This upside stemmed from increasing same-store sales across all business lines.

Reportedly, in the second quarter, adjusted net income went up 11% year over year to $69 million. Total revenues in the quarter increased 4% year over year to $3.22 billion. The reported figure also outpaced the Zacks Consensus Estimate of $3.21 billion. Total same-store sales increased 5.8% year over year to $3,173.3 million.

Gross profit rose 7.1% to $493.6 million in the reported quarter from $460.7 million witnessed in the year-ago quarter.

Quarter in Detail

Revenues from new-vehicle retail edged down 1.1% year over year to $1.71 billion in the reported quarter. New-vehicle retail sales declined 6.4% to 45,887 units. The average selling price of new-vehicle retail rose 5.6% year over to year to $37,208 million.

Used-vehicle retail revenues climbed 10.5% year over year to $888 million during the April-June quarter. Revenues from used-vehicle wholesale declined 4.2% year over year to $81.7 million. Used-vehicle retail unit sales volume expanded 9.6% to 42,865 units. The average selling price of used-vehicle retail inched up 0.8% to $20,724 million from the year-ago figure of $20,567 million.

Revenues from service body and parts went up 7.7% to $335.5 million. The company’s F&I business recorded 12.7% growth in revenues to $129 million. Revenues from fleet and others came in at $79.8 million compared with the year-ago figure of $54.4 million.

Financial Details

Lithia Motors had cash and cash equivalents of $44.7 million as of Jun 30, 2019, up from the $31.6 million as of Dec 31, 2018. Long-term debt was $1.32 billion as of Jun 30, 2019, 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 second-quarter 2019. The amount will be payable on Aug 23, to shareholders of record as of Aug 9, 2019.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Lithia Motors has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 #2 (Buy). We expect an above average return from the stock in the next few months.



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