Lithia (LAD) Q2 Earnings Surpass Estimates, Decline Y/Y
Lithia Motors LAD reported adjusted earnings of $10.91 per share in second-quarter 2023, which declined from the prior-year quarter’s $12.18. The bottom line, nevertheless, surpassed the Zacks Consensus Estimate of $9.19 per share. (reason)
Total revenues jumped 12% year over year to $8,111.5 million, the top line also outpaced the Zacks Consensus Estimate of $7,697 million.
Lithia Motors, Inc. Price, Consensus and EPS Surprise
Lithia Motors, Inc. price-consensus-eps-surprise-chart | Lithia Motors, Inc. Quote
Segmental Performance
New vehicle retail revenues increased 23.5% year over year to $4,014.7 million, surpassing our estimate of $3,327.5 million due to an increase in vehicle unit sold and average selling price. New vehicle units sold rose 21.5% from the prior-year quarter’s levels to 83,539 units and beat our estimate of 69,169 units. The average selling price of new-vehicle retail increased to $48,258 from $47,281 reported in the prior-year quarter, beating our estimate of $48,106. However, gross margin in this segment contracted 300 basis points (bps) to 9.6% amid high cost of sales, which flared up 27.7% year over year to $3,627.6 million and crossed our projection of $3,011.4 million.
Used-vehicle retail revenues fell 1.7% year over year to $2,455.1 million, but outpaced our estimate of $2,339.8 million. Higher than expected average selling price resulted in sales outperformance. The used-vehicle retail units sold fell 0.6% from the year-ago quarter to 80,573 units, falling short of our expectation of 82,610 units. The average selling price of used-vehicle retail was $30,471, dropping 1.1% year over year, but beating our projection of $28,323.6. The gross margin in the segment came down 80 bps to 8.7%.
Revenues from used-vehicle wholesale increased 5.6% to $403.9 million but missed our estimate of $428.6 million.
Revenues from service, body and parts were up 17.8% from the prior-year period’s levels to $804.4 million, outpacing our estimate of $778.7 million. The gross margin in the segment increased 190 bps to 55.2%. The company’s finance and insurance revenues rose 2.3% to $337.9 million, but missed our estimate of $347.2 million. Revenues from fleet and others were $95.5 million, down 1.8% year over year, lagging our expectation of $141.8 million.
Same-store new-vehicle revenues increased 7% year over year and the same-store used-vehicle retail sales declined 15.8%. The same-store revenues from finance and insurance dipped 6.9%, while that of the service, body and parts unit grew 5.8%.
Financial Tidbits
Cost of sales jumped 14.2% year over year in second-quarter 2023. SG&A expenses were $842.2 million, up 5.7% from $796.9 million in the year-ago quarter. Adjusted SG&A as a percentage of gross profit was 60.4%. Pretax and net profit margins declined from the year-ago levels.
The company approved a dividend of 50 cents per share, which is to be paid on Aug 25, 2023, to shareholders of record on Aug 11, 2023.
Lithia had cash/cash equivalents/restricted cash of $199.7 million as of Jun 30, 2023, down from $246.7 million as of Dec 31, 2022. Long-term debt was $5,414 million as of Jun 30, 2023, up from $5,088.3 million as of Dec 31, 2022.
Zacks Rank & Key Picks
LAD currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the auto space include Ford Motor Company F, Oshkosh Corporation OSK and Lear Corporation LEA. While F and OSK sport a Zacks Rank #1 (Strong Buy), LEA carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for F’s 2023 sales implies year-over-year growth of 4.9%. The 2023 EPS estimate has been revised upward by 5 cents in the past seven days. The EPS estimate for 2024 has moved north by 5 cents in the past seven days.
The Zacks Consensus Estimate for OSK’s 2023 sales and earnings implies year-over-year growth of 7.2% and 282.9%, respectively. The EPS estimate for 2023 has moved up by a cent in the past seven days. The 2024 EPS estimate has remained unchanged in the past seven days.
The Zacks Consensus Estimate for LEA’s 2023 sales and earnings implies year-over-year growth of 16% and 80.5%, respectively. The EPS estimate for 2023 has moved north by 25 cents in the past seven days. The 2024 EPS estimate has moved up by 8 cents in the past seven days.
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