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Lithia Motors' (LAD) Q3 Preliminary Numbers Look Impressive

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Zacks Equity Research
·3 min read
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Lithia Motors, Inc. LAD released strong preliminary third-quarter 2020 (ended Sep 30, 2020) results on Sep 29.

The figures reported by Lithia Motors are yet to be reviewed and finalized by the company, and are susceptible to alterations following completion of the quarter-end review process.
 
Let’s take a look into the current projections issued by the company.

Based on the preliminary results, Lithia Motors expects net income per diluted share in the range of $6.10 to $6.40 for the quarter under discussion. This reflects an increase of 68-76% from the year-ago period’s $3.64 per share.

Moreover, the bottom-line projection for the third quarter compares favorably with the year-ago adjusted net income per diluted share of $3.39, indicating a year-over-year surge of 80-89%.  The earnings estimate is also higher than the current Zacks Consensus Estimate of $4.05.

Key Drivers of the Expected Outperformance

The top line for the third-quarter is expected to increase in mid- to high- single-digit range compared with the year-ago quarter's revenues of $3.3 billion.

The company witnessed sequential increases in same-store sales across all its business lines during the third quarter. Moreover, same-store gross profit margins remained flat to higher than the second quarter’s stellar levels.

Recently, the auto retailer rolled out a national digital home channel — Driveway — focused on serving customers outside of a physical dealership. Driveway is the company’s e-commerce home solution, which enables customers to purchase or sell vehicles online and schedule at-home services. This venture will likely expand to six regions by 2023 and is anticipated to generate $9 billion in annual revenues over the next five years. The company’s strategy of acquiring strong, high-performing franchises, alongside Driveway, is a key driver in boosting its profitability and growth prospects.
 
Lithia Motors is one of the leading automotive retailers of new and used vehicles, and related services in the United States. It offers tailored services through the company’s nationwide network.

Lithia Motors currently sports a Zacks Rank #1 (Strong Buy). Despite the economic recession faced by the auto industry due to the coronavirus outbreak, the company delivered solid results in the second quarter, with earnings of $3.72 per share, up 26% year on year.
 
Shares of the company have rallied 51.7% year to date, outperforming its industry’s rise of 9.4% over the same period.

Other Key Picks

Some other top-ranked stocks in the auto space include AutoNation Inc. AN, Group 1 Automotive Inc. GPI, and Penske Automotive Group Inc. PAG, each flaunting a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AutoNation has appreciated 7% year to date, whereas Group 1 Automotive and Penske Automotive have declined 13.1% and 5.1%, respectively, during the same period.

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