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Lithia Beats Q2 Earnings Estimates

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Lithia Motors Inc. (LAD - Free Report) posted a 41.9% increase in adjusted earnings per share to $1.05 in the second quarter of 2013 compared with 74 cents earned in the corresponding quarter last year. Reported earnings also surpassed the Zacks Consensus Estimate by 13 cents. Net income jumped 40.9% to $27.4 million from $19.4 million in the year-ago quarter.

Revenues for the quarter increased 22.6% to $1.0 billion from $822.3 million in the year-ago quarter, beating the Zacks Consensus Estimate of $986.0 million. The improvement in revenues was driven by better performance across all the segments, with finance and insurance business, and new vehicle and used vehicle sales being the bright spots. Recent acquisition and same store sales had favorable impacts on the company’s revenues.

Revenues from new vehicle sales improved 24.9% to $569.5 million in the quarter. New vehicle retail sales increased 21.8% to 17,024 units. Revenues per vehicle increased 2.5% to $33,452. On a same-store basis, revenues from new vehicle sales went up 18.9% to $541.7 million.

Revenues from used vehicle retail climbed 24.7% to $258.5 million in the quarter. Revenues from used vehicle wholesale went up 7.4% to $37.7 million. Used vehicle retail sales improved 21.3% to 14,074 units with revenues per vehicle increasing 2.8% to $18,365. Same-store revenues from used vehicle retail sales went up 18.7% to $246.0 million and used vehicle wholesale sales gained 1.6% to $35.6 million.

Revenues from service body and parts went up 10.5% to $94.5 million. Meanwhile, the company’s finance and insurance business witnessed a 25.9% rise in revenues to $34.2 million. Revenues from Fleet and other went up 25.3% to $14.2 million.

Gross profit increased 19.2% to $159.8 million from $134.1 million in the year-ago quarter. Operating income improved 23.7% to $45.7 million from $36.9 million in the second quarter of 2012.

Financial Details

Lithia Motors had cash and cash equivalents of $20.3 million as of Jun 30, 2013, down from $42.8 million as of Dec 31, 2012. Total debt was $301.0 million as of Jun 30, 2013 compared with $295.1 million as of Dec 31, 2012.

In the first half of 2013, the company had an operating cash flow of $24.4 million compared with a cash outflow of $152.0 million in the corresponding period of 2012.

New Store information

In Jun 2013, Lithia purchased BMW, Honda and Volkswagen stores in Salem, Ore. These stores are expected to generate $110 million additional revenues annually. The company also opened a MINI store in Anchorage, Alaska in Apr, 2013, which will yield annualized revenues of $13 million.


Lithia Motors expects earnings in the range of $1.06 to $1.08 per share for the third quarter of 2013 and $3.80 to $3.85 for full year 2013. The company expects revenues between $3.9 billion and $4.0 billion for 2013, with a 17% increase in new vehicle same-store sales and a 16.5% rise in used vehicle same-store sales.

Same-store sales from service body and parts are expected to improve 7%. The company also expects capital expenditures of $55.0 million and a tax rate of 39.5% for 2013.

Our Take

Lithia Motors is the ninth largest automotive retailer in the U.S. With 91 stores in 11 states, the company provides 27 new vehicle brands along with all brands of used vehicle. Currently, it retains a Zacks Rank #1 (Strong Buy).

AutoNation Inc. (AN - Free Report) , another prominent automotive retailer in the U.S, posted a 10.6% rise in earnings per share to 73 cents in the second quarter. However, earnings missed the Zacks Consensus Estimate by a penny.

Revenues increased 13.4% to $4.43 billion, beating the Zacks Consensus Estimate of $4.35 billion. The revenue growth was attributable to strong performance in all business sectors along with higher revenues from retailed used vehicle and Finance and Insurance businesses.

Some other stocks that are performing well in the industry where Lithia Motors operates include Asbury Automotive Group, Inc. (ABG - Free Report) and Group 1 Automotive Inc. (GPI - Free Report) . Asbury Automotive carries a Zacks Rank #1 (Strong Buy) while Group 1 is a Zacks Rank #2 (Buy) stock.

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