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It has been about a month since the last earnings report for Lithia Motors (LAD). Shares have added about 18% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lithia Motors due for a pullback? 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 catalysts.
Lithia Motors Q2 Earnings & Sales Down Y/Y
Lithia Motors reported adjusted earnings of $3.72 per share in second-quarter 2020, beating the Zacks Consensus Estimate of $1.51. Higher-than-expected revenues across all units led to the outperformance. The bottom line also increased 26% from the prior-year quarter’s $2.95 per share on the back of operational efficiency.
Cost of sales declined 15.9% year over year during second-quarter 2020. SG&A, as a percentage of gross profit, also declined from the prior-year level. Pretax and net profit margins improved from the year-ago levels. In fact, Lithia Motors claims to have reported the highest quarterly adjusted earnings per share in the company's history.
Total revenues fell 14.4% year over year to $2,758.6 million. However, the top line surpassed the Zacks Consensus Estimate of $2,318 million.
New-vehicle retail revenues declined 19.9% year over year to $1,367.8 million but topped the Zacks Consensus Estimate of $952 million. New-vehicle retail units sold decreased 24% from the prior-year quarter to 34,869. The average selling price of new-vehicle retail rose 5.4% year over to year to $39,226.
Used-vehicle retail revenues rose 3.8% year over year to $922.2 million and beat the Zacks Consensus Estimate of $515 million. Used-vehicle retail units sold grew 1.5% from the year-ago quarter to 43,505. The average selling price of used-vehicle retail improved 2.3% to $21,196 from the year-ago figure of $20,724. Meanwhile, revenues from used-vehicle wholesale contracted 37.2% year over year to $51.3 million but surpassed the consensus mark of $15.5 million.
Revenues from service, body and parts were down 17.9% from the prior-year period to $275.5 million but beat the consensus mark of $230 million. The company’s F&I (Finance & Insurance) business recorded a 3.2% year-over-year decline in revenues to $124.9 million. The metric, however, topped the consensus estimate of $81 million. Revenues from fleet and others were $16.9 million, down 78.8% year over year.
While same-store new vehicle sales decreased 23.5% year over year, same-store used vehicle retail sales increased 0.5%. Same-store revenues from the F&I business and service, body and parts unit dropped 6.9% and 20.6%, respectively.
Dividend & Financials
Despite coronavirus-led uncertainty that has prompted many companies to suspend payouts, Lithia Motors continues to pay dividends, in turn preserving shareholder value. In fact, the board recently hiked the payout by a penny per share. The dividend of 31 cents a share will be payable on Aug 28 to shareholders of record as of Aug 14, 2020.
The company had cash and cash equivalents of $120.3 million as of Jun 30, 2020. Long-term debt was $1.36 billion, marking a decrease from $1.43 billion as of Dec 31, 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 27.03% due to these changes.
Currently, 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 B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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