A month has gone by since the last earnings report for Lithia Motors (LAD). Shares have added about 6.2% 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 drivers.
Lithia Motors Q4 Earnings & Revenues Beat, Up Y/Y
Lithia Motors reported adjusted earnings per share of $2.57 in fourth-quarter 2018, increasing from $2.15 in the prior-year quarter. Further, the bottom line beat the Zacks Consensus Estimate of $2.42.
Reportedly, in the quarter under review, adjusted net income rose 12% year over year to $61 million. Total revenues in the quarter increased 10% year over year to $2.97 billion, beating the Zacks Consensus Estimate of $2.94 billion.
Gross profit increased more than 11.6% to $441.9 million in the quarter under review from $396.1 million in the year-ago quarter.
In 2018, the company’s adjusted net income increased 16% year over year to $244 million and adjusted earnings per share rose 19% to $9.98.
Revenues for the year went up 17% year over year to $11.8 billion.
Quarter in Detail
Revenues from new-vehicle retail rose 4.5% year over year to $1.7 billion in the reported quarter. New-vehicle retail sale volume expanded 0.2% to 45,287 units. The average selling price of new-vehicle retail sale rose 4.3% to $37,281 from the year-ago figure.
Used-vehicle retail revenues increased 19.7% year over year to $753.4 million in the quarter under review while revenues from used-vehicle wholesale rose 9.8% to $78.1 million. Used-vehicle retail sale volume improved 12.5% to 36,273 units. The average selling price of used-vehicle retail sale gained 6.4% to $20,771 million from the year-ago figure.
Revenues from service body and parts went up 15.6% to $314 million. The company’s finance and insurance business recorded 9.3% rise in revenues to $112.8 million. Revenues from fleet and others were $26.7 million compared with the year-ago figure of $12.2 million.
Acquisitions & Divestments
In 2018, the company added net $1.2 billion in estimated annualized revenues through acquisition and divestiture activities.
During the year, Lithia Motors acquired two large platforms in Northeast, made two small complementary acquisitions and added a point in Texas. Further, it divested eight locations that generated gain of $15 million.
The company expects the nationwide expansion through acquisition to continue in 2019. It targets platforms that are good assets but are performing below their potential.
Lithia Motors had cash and cash equivalents of $31.6 million as of Dec 31, 2018, down from $57.3 million as of Dec 31, 2017. Long-term debt was $1.36 billion as of Dec 31, 2018, marking an increase from $1.03 billion recorded in the prior-year period.
Dividend & Share Repurchases
Lithia Motors’ board approved a quarterly dividend of 29 cents per share for fourth-quarter 2018. The amount will be payable on Mar 22, 2019, to shareholders of record as of Mar 8, 2019.
Between Oct 24 and Dec 31, the company repurchased around 489,000 shares at an average price of $70.96 per share. In the last year, Lithia Motors repurchased roughly 2.1 million shares or8.5% of outstanding shares.
Further, the company is left with $234 million under its share-repurchase authorization.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -7.6% due to these changes.
At this time, Lithia Motors has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Lithia Motors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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