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Lithia (LAD) Continues Buyout Binge With Toyota Store Acquisition

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Lithia Motors, Inc. LAD recently announced the acquisition of Michael's Toyota dealership in Bellevue, WA. The transaction has been financed through the company’s existing on-balance sheet capacity.

The new Toyota store is the largest volume dealer in the Washington state and has received numerous industry awards for the same.

The latest acquisition has enhanced Lithia’s presence and offerings in the largest automotive retail market in the Pacific Northwest region by twofold. Moreover, the buyout is anticipated to add $235 million in combined annualized revenues.

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 an ambitious five-year plan to yield $50 billion in revenues and $50 in earnings per share, including 200 plus acquisitions. The latest buyout brings Lithia’s total expected annualized revenue acquired during the first full year of the five-year plan to a whopping $7.8 billion, keeping the company well ahead its schedule of network expansion.

The Oregon-based dealer’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 Toyota dealership is in sync with the auto retailer’s proven success strategy of acquiring strong, high-performing franchises. It will also enable the auto retailer to create loyal and satisfied customers in the greater Seattle area.

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.

Of late, the company has been on a buyout spree as it seeks to profitably consolidate auto dealerships into its network. Last week, Lithia entered the Mississippi market with the purchase of a Toyota dealership in Jackson, while the auto retailer also sold an Audi store in California.

Earlier this month, 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 117.4% in the past year compared with the industry’s rally of 109.3%.

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