Lithia Motors ( LAD - Snapshot Report ) posted its second-quarter 2012 earnings per share of 76 cents, up 41% from 54 cents in the comparable quarter of 2011 (excluding all special items). With this, it surpassed the Zacks Consensus Estimate by 12 cents.

In absolute terms, profits escalated 38% to $19.9 million from $14.4 million in the year-ago quarter. Meanwhile, reported earnings were $20.5 million or 78 cents per share compared with $14.7 million or 55 cents.

The company’s revenues for the quarter came in at $847.1 million, up 26% compared with $672.5 million in the year-ago quarter. The growth in revenues was driven by strong retail new vehicle sales and higher revenues from finance and insurance business. Revenues were higher than the Zacks Consensus Estimate of $773 million.

Revenues from new vehicle sales surged 35.3% to $470.4 million. New vehicle retail sales increased 34.3% to 14,406 units. However, revenues per vehicle increased marginally to $32,655.

On a same-store basis, revenues from new vehicles retailed went up 33.9% to $454.4 million. New vehicle retail sales went up 32.9% to 13,939 units, with revenues per vehicle increasing 0.7% to $32,602.

Revenues from used vehicles retailed went up 20.5% to $212.8 million and wholesale vehicles escalated 23.8% to $36.1 million. Used vehicle retail sales improved 18.2% to 11,923 units and wholesale vehicles boosted 22.7% to 4,621 units. Revenues per used vehicle retailed were $17,845 and revenues per used vehicle wholesaled were $7,808 during the quarter.

Same store revenues for used vehicles retailed were up 19.8% to $205.8 million and used vehicles wholesaled improved 23.5% to $34.8 million. Same store used vehicles retailed increased 17.3% to 11,546 units and wholesale vehicles grew 22.1% to 4,497 units.

Revenues from service body and parts went up 9.4% to $88.6 million. Meanwhile, the company’s finance and insurance business witnessed a 33.4% growth in revenues to $27.9 million.

Gross profit increased 18% to $138.2 million from $117.1 million in the year ago quarter. SG&A expenses hiked 16.2% to $96.2 million from $82.8 million a year ago. Gross profit per new vehicle retailed decreased 7.9% to $2,404 while gross profit per used vehicle retailed declined marginally to $2,662. However, finance and insurance gross profit per vehicle retailed rose 5.5% to $1,059.

Operating income swelled 27.3% to $37.8 million from $29.7 million recorded in the second quarter of 2011. However, operating margin went up marginally to 4.5% from 4.4% in the last year.

Share Repurchase

During the quarter, Lithia repurchased 741,092 shares of Class A common stock for $24.23 per share. During the last six months, the company has repurchased 823,092 shares for $24.17 each. The company’s Board of Directors authorized an additional repurchase of 1 million shares. The company has approximately 1,879,853 shares remaining for repurchase.

Financial Details

Lithia Motors had cash and cash equivalents of $16.2 million as of June 30, 2012, down from $20.9 million as of December 31, 2011. Total debt was $232.5 million as of June 30, 2012 compared with $286.9 million as of December 31, 2011.

The company had an operating cash outflow of $152.0 million in the first six months of 2012 compared to cash outflow of $17.2 million in the corresponding period of 2011.

Outlook

Lithia Motors expects earnings in the range of 74 cents to 76 cents per share for the third quarter of 2012 and $2.69 to $2.75 for the full year 2012. The company expects revenues between $3.2 billion and $3.3 billion for 2012, with a 22% increase in new vehicle same store sales and a 16% rise in used vehicle same store sales. The company expects that capital expenditure will amount to $48 million for 2012.

Our Take

Lithia Motors is the ninth largest automotive retailer in U.S. With 85 stores in 11 states, the company provides 27 new vehicle brands along with all brands of used vehicle. It competes with AutoNation Inc. ( AN - Analyst Report ) and Penske Automotive Group Inc. ( PAG - Analyst Report )

The acquisition of Chevrolet Cadillac store in Bellingham, Washington and GMC and Buick franchises in Fairbanks, Alaska, is expected to boost the company’s earnings in the future. Currently, Lithia retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.