Lithia (LAD) Buys Toyota of Jackson, Sets Foot in Mississippi Market

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Lithia Motors, Inc. LAD recently announced the acquisition of Toyota of Jackson in Jackson, MS. Terms of the deal are still under the wraps.

The new location has expanded Lithia’s footprint in the Southeast region and is its first store in the state of Mississippi. Moreover, the buyout is anticipated to add $95 million in combined annualized revenues. The transaction has been financed through the company’s existing on-balance sheet capacity.

Lithia is highly optimistic about this buyout. The store would perfectly complement the company’s existing product portfolio. In fact, the buyout aligns with Lithia’s plan to fortify the reach and density of its network in a bid to serve customers more conveniently.

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 $7.6 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 in the Southeast region 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 Toyota dealership 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.

The company's five-year plan has prompted a flurry of acquisitions in recent months as it seeks to profitably consolidate auto dealerships into its network. Few days back, the company acquired the Southwest Kia Auto Group, with five dealership stores located in the major metropolitan markets of Austin and Dallas, TX. The auto retailer has also taken over two luxury dealerships in Van Nuys, CA, being BMW of Sherman Oaks and Acura of Sherman Oaks, both serving the greater Los Angeles area.

Lithia, peers of which include Penske Automotive PAG, Group 1 Automotive GPI and AutoNation AN, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have surged 119.1% in the past year compared with the industry’s rally of 106.8%.

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