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Lithia Motors, Inc. (NYSE: (LAD - Free Report) – Free Report) keeps reporting record earnings even as auto sales slow. How does this Zacks Rank #1 (Strong Buy) keep doing it?
Lithia is one of the largest auto retailers in the United States with 167 dealerships in 18 states. It offers 30 brands of new and used autos along service and body parts.
Adding to Its Stores
On Aug 8, Lithia announced it acquired the Downtown Los Angeles Auto Group, which operated Audi, Mercedes-Benz, Nissan, Porsche, Toyota, and Volkswagen stores in downtown Los Angeles and a Nissan store in Carson, CA.
This group is expected to generate $1 billion in revenue, and another $0.55 in earnings per share, for Lithia.
Lithia has been slowly adding to its stable of stores across the country.
"This opportunity deploys approximately half of the $300 million raised in our recent senior notes offering," said Bryan DeBoer, President and CEO.
"The remaining funds from the notes offering, our free cash flow and a recently increased syndicated credit facility support our continued growth cadence. Improving performance to realize the full potential of our acquisitions achieves greenfield rates of return," he said.
Raised Full Year Guidance
Due to this large acquisition, and its impact on earnings, Lithia raised its full year 2017 earnings guidance to a range of $8.55 to $8.70 a share.
As a result, the analysts raised estimates as well, with 3 estimates rising for 2017 and 5 moving higher for 2018.
The 2017 Zacks Consensus Estimate jumped to $8.63 from $8.25 in the last 90 days. That's earnings growth of 16.3% compared to 2016 when it made $7.42.
2018's Zacks Consensus Estimate also rose to $9.44 from $8.74, a gain of 9.4%.
27th Record Quarter in a Row
On July 28, Lithia reported its second quarter results. Revenue and earnings per share were the highest in company history and it was the 27th consecutive quarter of record results.
Second quarter revenue rose 16% to $2.5 billion from $2.1 billion in the year ago quarter.
Key same store sales metrics remained positive even as auto sales weaken.
Total same store sales rose 3% even though new vehicle sales increased just 1%. Used vehicle same store sales helped boost the quarter, as those gained 4%.
Service, body and parts same store sales also continue to be robust, rising 7%.
Chuy's Holdings, Inc. (Nasdaq: (CHUY - Free Report) – Free Report) is struggling in the challenging restaurant industry. This Zacks Rank #5 (Strong Sell) is expected to see an earnings decline this year.
Chuy's is a Texas-based Tex-Mex restaurant chain. It operates 86 full-service restaurants across 19 states where each location offers a unique "unchained" look and feel.
Comparable Restaurant Sales Drop in the Second Quarter
On Aug 3, Chuy's reported its second quarter results and met the Zacks Consensus Estimate of $0.31. It was the second quarter in a row it had met the estimate.
Revenue rose 7.5% to $94.5 million compared to the year ago period.
However, comparable sales fell 1% in the second quarter driven by a 2.4% decrease in the average weekly customers offset by a 1.4% increase in average check. The comparable restaurant base was 64 restaurants. The quarter was also negatively impacted by 30 basis points due to Easter falling in the second quarter of 2017 compared to the first quarter of 2016.
In response to the weak market conditions, Chuy's has lowered its development target to 12 new restaurants, which was the low end of its range of 12 to 14, for the year. It is also reviewing the 2018 pipeline and intends to be conservative heading into the new year.
For now, Chuy's expects to open 8 to 12 new restaurants in 2018.
Lowered Full Year Guidance
Full year earnings guidance was lowered to the range of $1.04 to $1.08 from $1.11 to $1.15 to reflect the market conditions.
As a result, analysts also cut their estimates, with the Zacks Consensus Estimate falling to $1.04 from $1.09 just 60 days before. This is an earnings decline of 3.7% as the company made $1.08 in 2016.
Comparable restaurant sales growth was also revised down to (1.5%) to 0.5% from 0.5% to 1.5%. Additionally, this was adjusted in August, before the hurricanes hit, so it's possible that further revisions downward are still to come.
Additional content:
Can Snapchat Maintain Its Lead Over Instagram?
Per market analytics company Jumpshot, as reported by Recode, Snap Inc’s (NYSE: (SNAP - Free Report) – Free Report) messaging application Snapchat added 52% new users in the United States compared with 48% for Facebook’s (Nasdaq: – Free Report) Instagram in August. However, the margin seems to be narrowing. On a month-over-month basis, while Instagram registered an improvement in new additions, Snapchat suffered a decline.
The scenario is totally different when it comes to the global market. While Snapchat had 38.5% of new signups in August, Instagram registered 61.5%, per Jumpshot.
Growing Popularity of Instagram vs Snapchat’s Efforts
Snapchat offered serious competition to Facebook in terms of attracting teenagers/young adults to its platform. Consequently, Facebook started to mimic Snapchat features on its platforms so as to boost user growth and engagement levels and succeeded in making these more popular than Snapchat.
The slowdown in Snapchat’s user growth is attributed primarily to the popularity of Instagram Stories which is a blatant rip-off of the former’s hallmark feature.
In August last year, Facebook added the “Stories” feature to Instagram. In November 2016, Instagram started allowing users to add links to their Stories.Later, Facebook launched the same on Messenger, WhatsApp as well as on its main platform.
Facebook again copied the features of Snapchat by adding augmented reality filters, hashtag stickers and direct messaging features (enabling users to send text and disappearing photos and videos in the chat section).
Instagram Stories was recently reported to have crossed 250 million users, substantially outperforming Snapchat’s 173 million.
Snap’s primary source of revenues is advertising. A decline in user growth may look unattractive to advertisers and thereby dampen its growth opportunities.
However, Snapchat is aggressively ramping up its original content efforts in a bid to attract new subscribers and survive tough competition from established players like Amazon (Nasdaq: (AMZN - Free Report) – Free Report) Prime, Hulu and HBO. Facebook, on the other hand, recently announced its plans to spend $1 billion on original content over the next one year.
Per eMarketer’s latest report, this year, Snapchat’s domestic user base is likely to increase 25.8% to 79.2 million driven by a 19.2% increase in users in the 18 to 24 age group. In fact, for the first time, Snapchat is projected to have the highest teen audience (12 to 17 & 18 to 24 cohorts) compared to both Facebook and Instagram, per eMarketer.
For Facebook, eMarketer anticipates a 3.4% decline in its monthly average user base for the important 12 to 17 age group, a sharp deceleration from 1.2% decline witnessed last year. An 8.8% growth in Instagram users in the 12 to 17 age group is projected.
We believe Snapchat needs to focus more on the global market and target other age groups in order to stay ahead in the competition.
4 Stocks to Watch after the Massive Equifax Hack
Cybersecurity stocks spiked on recent news of a data breach affecting 143 million Americans. But which stocks are the best buy candidates right now? And what does the future hold for the cybersecurity industry?
Equifax is just the most recent victim. Computer hacking and identity theft are more common than ever. Zacks has just released Cybersecurity! An Investor’s Guide to inform Zacks.com readers about this $170 billion/year space. More importantly, it highlights 4 cybersecurity picks with strong profit potential.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Lithia Motors, Chuy's Holdings, Snap, Facebook and Amazon highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – September 28, 2017 – Zacks Equity Research Lithia Motors, Inc. (NYSE: (LAD - Free Report) – Free Report) as the Bull of the Day, Chuy's Holdings, Inc. (Nasdaq: (CHUY - Free Report) – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Snap Inc (NYSE: (SNAP - Free Report) – Free Report), Facebook (Nasdaq: – Free Report)and Amazon(Nasdaq: (AMZN - Free Report) – Free Report).
Here is a synopsis of all four stocks:
Bull of the Day:
Lithia Motors, Inc. (NYSE: (LAD - Free Report) – Free Report) keeps reporting record earnings even as auto sales slow. How does this Zacks Rank #1 (Strong Buy) keep doing it?
Lithia is one of the largest auto retailers in the United States with 167 dealerships in 18 states. It offers 30 brands of new and used autos along service and body parts.
Adding to Its Stores
On Aug 8, Lithia announced it acquired the Downtown Los Angeles Auto Group, which operated Audi, Mercedes-Benz, Nissan, Porsche, Toyota, and Volkswagen stores in downtown Los Angeles and a Nissan store in Carson, CA.
This group is expected to generate $1 billion in revenue, and another $0.55 in earnings per share, for Lithia.
Lithia has been slowly adding to its stable of stores across the country.
"This opportunity deploys approximately half of the $300 million raised in our recent senior notes offering," said Bryan DeBoer, President and CEO.
"The remaining funds from the notes offering, our free cash flow and a recently increased syndicated credit facility support our continued growth cadence. Improving performance to realize the full potential of our acquisitions achieves greenfield rates of return," he said.
Raised Full Year Guidance
Due to this large acquisition, and its impact on earnings, Lithia raised its full year 2017 earnings guidance to a range of $8.55 to $8.70 a share.
As a result, the analysts raised estimates as well, with 3 estimates rising for 2017 and 5 moving higher for 2018.
The 2017 Zacks Consensus Estimate jumped to $8.63 from $8.25 in the last 90 days. That's earnings growth of 16.3% compared to 2016 when it made $7.42.
2018's Zacks Consensus Estimate also rose to $9.44 from $8.74, a gain of 9.4%.
27th Record Quarter in a Row
On July 28, Lithia reported its second quarter results. Revenue and earnings per share were the highest in company history and it was the 27th consecutive quarter of record results.
Second quarter revenue rose 16% to $2.5 billion from $2.1 billion in the year ago quarter.
Key same store sales metrics remained positive even as auto sales weaken.
Total same store sales rose 3% even though new vehicle sales increased just 1%. Used vehicle same store sales helped boost the quarter, as those gained 4%.
Service, body and parts same store sales also continue to be robust, rising 7%.
Bear of the Day:
Chuy's Holdings, Inc. (Nasdaq: (CHUY - Free Report) – Free Report) is struggling in the challenging restaurant industry. This Zacks Rank #5 (Strong Sell) is expected to see an earnings decline this year.
Chuy's is a Texas-based Tex-Mex restaurant chain. It operates 86 full-service restaurants across 19 states where each location offers a unique "unchained" look and feel.
Comparable Restaurant Sales Drop in the Second Quarter
On Aug 3, Chuy's reported its second quarter results and met the Zacks Consensus Estimate of $0.31. It was the second quarter in a row it had met the estimate.
Revenue rose 7.5% to $94.5 million compared to the year ago period.
However, comparable sales fell 1% in the second quarter driven by a 2.4% decrease in the average weekly customers offset by a 1.4% increase in average check. The comparable restaurant base was 64 restaurants. The quarter was also negatively impacted by 30 basis points due to Easter falling in the second quarter of 2017 compared to the first quarter of 2016.
In response to the weak market conditions, Chuy's has lowered its development target to 12 new restaurants, which was the low end of its range of 12 to 14, for the year. It is also reviewing the 2018 pipeline and intends to be conservative heading into the new year.
For now, Chuy's expects to open 8 to 12 new restaurants in 2018.
Lowered Full Year Guidance
Full year earnings guidance was lowered to the range of $1.04 to $1.08 from $1.11 to $1.15 to reflect the market conditions.
As a result, analysts also cut their estimates, with the Zacks Consensus Estimate falling to $1.04 from $1.09 just 60 days before. This is an earnings decline of 3.7% as the company made $1.08 in 2016.
Comparable restaurant sales growth was also revised down to (1.5%) to 0.5% from 0.5% to 1.5%. Additionally, this was adjusted in August, before the hurricanes hit, so it's possible that further revisions downward are still to come.
Additional content:
Can Snapchat Maintain Its Lead Over Instagram?
Per market analytics company Jumpshot, as reported by Recode, Snap Inc’s (NYSE: (SNAP - Free Report) – Free Report) messaging application Snapchat added 52% new users in the United States compared with 48% for Facebook’s (Nasdaq: – Free Report) Instagram in August. However, the margin seems to be narrowing. On a month-over-month basis, while Instagram registered an improvement in new additions, Snapchat suffered a decline.
The scenario is totally different when it comes to the global market. While Snapchat had 38.5% of new signups in August, Instagram registered 61.5%, per Jumpshot.
Growing Popularity of Instagram vs Snapchat’s Efforts
Snapchat offered serious competition to Facebook in terms of attracting teenagers/young adults to its platform. Consequently, Facebook started to mimic Snapchat features on its platforms so as to boost user growth and engagement levels and succeeded in making these more popular than Snapchat.
The slowdown in Snapchat’s user growth is attributed primarily to the popularity of Instagram Stories which is a blatant rip-off of the former’s hallmark feature.
In August last year, Facebook added the “Stories” feature to Instagram. In November 2016, Instagram started allowing users to add links to their Stories.Later, Facebook launched the same on Messenger, WhatsApp as well as on its main platform.
Facebook again copied the features of Snapchat by adding augmented reality filters, hashtag stickers and direct messaging features (enabling users to send text and disappearing photos and videos in the chat section).
Instagram Stories was recently reported to have crossed 250 million users, substantially outperforming Snapchat’s 173 million.
Snap’s primary source of revenues is advertising. A decline in user growth may look unattractive to advertisers and thereby dampen its growth opportunities.
However, Snapchat is aggressively ramping up its original content efforts in a bid to attract new subscribers and survive tough competition from established players like Amazon (Nasdaq: (AMZN - Free Report) – Free Report) Prime, Hulu and HBO. Facebook, on the other hand, recently announced its plans to spend $1 billion on original content over the next one year.
Per eMarketer’s latest report, this year, Snapchat’s domestic user base is likely to increase 25.8% to 79.2 million driven by a 19.2% increase in users in the 18 to 24 age group. In fact, for the first time, Snapchat is projected to have the highest teen audience (12 to 17 & 18 to 24 cohorts) compared to both Facebook and Instagram, per eMarketer.
For Facebook, eMarketer anticipates a 3.4% decline in its monthly average user base for the important 12 to 17 age group, a sharp deceleration from 1.2% decline witnessed last year. An 8.8% growth in Instagram users in the 12 to 17 age group is projected.
We believe Snapchat needs to focus more on the global market and target other age groups in order to stay ahead in the competition.
4 Stocks to Watch after the Massive Equifax Hack
Cybersecurity stocks spiked on recent news of a data breach affecting 143 million Americans. But which stocks are the best buy candidates right now? And what does the future hold for the cybersecurity industry?
Equifax is just the most recent victim. Computer hacking and identity theft are more common than ever. Zacks has just released Cybersecurity! An Investor’s Guide to inform Zacks.com readers about this $170 billion/year space. More importantly, it highlights 4 cybersecurity picks with strong profit potential.
Get the new Investing Guide now>>
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.