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Lithia Motors' (LAD) Q3 Earnings Miss, Revenues Beat

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Share price of Lithia Motors Inc. (LAD - Free Report) increased 2% to $88.50 on Oct 21 after the company reported better-than-expected results for third-quarter 2016. Lithia Motors recorded a 1.5% rise in adjusted earnings per share to $2.06 in the third quarter of 2016 from $2.03 earned in the prior-year quarter. However, earnings missed the Zacks Consensus Estimate of $2.16. Adjusted net income fell almost 3% to $52 million from $53.6 million in the year-ago quarter.

Net income, on a reported basis, was $54 million or $2.14 per share compared with $43.4 million or $1.64 per share in the third quarter of 2015.

Revenues for the reported quarter went up 9% to $2.27 billion from $2.1 billion in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of $2.25 billion.

Revenues from new vehicle retail sales increased 5.7% to $1.3 billion in the quarter. New vehicle retail sales volume improved 2.8% to 38,417 units. Revenues per vehicle rose 3% to $33,774.

Revenues from used vehicle retail increased 14.8% to $580.9 million in the quarter. Revenues from used vehicle wholesale rose 8.3% to $75.3 million. Used vehicle retail sales volume improved 13% to 29,636 units, with revenues per vehicle rising 1.5% to $19,601.

Revenues from service body and parts went up 14.4% to $217.1 million. Meanwhile, the company’s finance and insurance business recorded a 14.5% rise in revenues to $87.7 million. Revenues from fleet and other decreased 28.8% to $11.4 million.

Gross profit increased 8.4% to $337.3 million in the reported quarter from $311.2 million in the year-ago quarter. Operating income improved 28.3% to $93.4 million from $72.8 million in the third quarter of 2015.

Segment Details

Revenues at the Domestic segment increased 9.1% to $888 million as retail new vehicle unit sales rose 2.2% to 12,634 vehicles. The segment’s income dropped 2.5% to $32.4 million in the quarter under review.

Revenues at the Import segment went up 10.6% to $989.1 million on a 4.4% rise in retail new vehicle unit sales to 21,568 automobiles. Segment income improved 4.4% to $32.8 million in the reported quarter.

Revenues at the Luxury segment rose 4.8% to $392.5 billion. Retail new vehicle sales declined 3.8% to 4,287 luxury vehicles. Meanwhile, the segment's income fell 10.8% to $7.4 million in the quarter.

Financial Details

Lithia Motors had cash and cash equivalents of $24.1 million as of Sep 30, 2016, down from $45 million as of Dec 31, 2015. Total debt was $801 million as of Sep 30, 2016, compared with $645.4 million as of Dec 31, 2015.

Dividend & Share Repurchase

Lithia Motors announced a quarterly dividend of 25 cents per share. The dividend will be paid on Nov 25, to shareholders on record as of Nov 11, 2016.

In the third quarter of 2016, the company repurchased 44,250 shares at an average price of $84.12 per share. In the first nine months of 2016, it repurchased 1.2 million shares for $108 million at an average price of $79.05 per share. Under the current share repurchase authorization of $250 million, Lithia Motors has around $197 million available for future repurchase.

Acquisition

Through Oct 2016, Lithia Motors completed the acquisition of 14 stores.

Outlook

Lithia Motors anticipates earnings of $7.40–$7.45 per share for full-year 2016, down from the prior forecast of $7.50–$7.65.

The company continues to expect revenues between $8.5 billion and $8.6 billion for 2016, with a 2.5% increase in new vehicle sales, down from the previous expectation of 3.5%, and a 9.5% rise in used vehicle sales. Sales from service body and parts will likely increase 8.5% during the year, up from the previous projection of 7.5%.

The company further expects earnings of $8−$8.30 per share for full-year 2016, with sales of $9.2−$9.4 billion.

LITHIA MOTORS Price, Consensus and EPS Surprise

 

LITHIA MOTORS Price, Consensus and EPS Surprise | LITHIA MOTORS Quote

Zacks Rank

Lithia Motors currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto space include The Goodyear Tire & Rubber Company (GT - Free Report) , Tata Motors Limited and Standard Motor Products Inc. (SMP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Goodyear Tire & Rubber Company has seen its earnings estimates move north over the last 60 days.

Tata Motors Limited has a long-term expected growth rate of 3.60%.

Standard Motor Products Inc. has a long-term expected growth rate of 15%.

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