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Lithia Gains on Q3 Earnings Beat

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Lithia Motors Inc.’s (LAD - Free Report) share price rose 2.1% to $64.66 on Oct 24 after the company posted a 27% increase in adjusted earnings per share to $1.13 in the third quarter of 2013 compared with 89 cents earned in the year-ago quarter. Reported earnings also beat the Zacks Consensus Estimate by 3 cents.

Adjusted net income augmented 28.1% to $29.6 million from $23.1 million in the year-ago quarter. Including a non-core tax benefit of $1.3 million or 5 cents per share, Lithia reported net income of $30.9 million or $1.18 per diluted share in the third quarter of 2013. The third quarter of 2012 did not incorporate any adjustments.

Revenues for the quarter increased 21.7% to $1.07 billion from $878.5 million in the year-ago quarter, marginally beating the Zacks Consensus Estimate of $1.05 million. The improvement in revenues was driven by better performance across all segments, with fleet and other business, and new vehicle and used vehicle sales being the bright spots.

Revenues from new vehicle sales improved 22.8% to $604.1 million in the quarter. New vehicle retail sales increased 22% to 18,109 units. Revenues per vehicle increased 0.7% to $33,361. On a same-store basis, revenues from new vehicle sales went up 15.8% to $569.7 million.

Revenues from used vehicle retail climbed 23.6% to $280.7 million in the quarter. Revenues from used vehicle wholesale went up 24% to $43.4 million. Used vehicle retail sales improved 17.3% to 15,496 units with revenues per vehicle increasing 5.4% to $18,117. Used vehicle wholesale sales improved 17.8% to 6,059 units and revenues per vehicle went up 5.2% to $7,162. Same-store revenues from used vehicle retail sales went up 16.9% to $265.7 million and used vehicle wholesale sales gained 17.9% to $41.4 million.

Revenues from service body and parts went up 9.8% to $97.8 million. Meanwhile, the company’s finance and insurance business witnessed a 20.1% rise in revenues to $37.1 million. Revenues from Fleet and others went up 34.3% to $6.1 million.

Gross profit increased 16.1% to $165.4 million from $142.5 million in the year-ago quarter. Operating income improved 20.2% to $51.7 million from $43 million in the third quarter of 2012.

Financial Details

Lithia Motors had cash and cash equivalents of $16.1 million as of Sep 30, 2013, down from $42.8 million as of Dec 31, 2012. Total debt was $225.2 million as of Sep 30, 2013 compared with $295.1 million as of Dec 31, 2012.

In the first nine months of 2013, the company had an operating cash flow of $112.7 million compared with a cash outflow of $176.3 million in the corresponding period of 2012.

New Store information

On Oct 7, 2013, Lithia acquired Stockton Nissan Kia in Stockton, Calif. This store is expected to generate $45 million additional revenues annually. Including this, the company opened 5 stores in new locations in 2013. These new stores will help boost the company’s new vehicle sales.

On Oct 24, 2013, Lithia announced the acquisition of Fresno Lincoln Volvo in Fresno, Calif. The company plans to relocate the Lincoln franchise to its Ford store and its Mazda franchise to the new location. This acquisition is expected to generate additional revenues of $15 million annually.


Lithia Motors expects earnings in the range of 88 cents to 90 cents per share for the fourth quarter of 2013 and $3.90 to $3.92 for full year 2013. The company expects revenues between $3.9 billion and $4.0 billion for 2013, with a 16.6% increase in new vehicle same-store sales and a 17.2% rise in used vehicle same-store sales.

Same-store sales from service body and parts are expected to improve 6.3%. The company also expects capital expenditure of $55 million and a tax rate of 39.5% for 2013.

For 2014, Lithia expects earnings in the range of $4.15 to $4.25 per share with revenues between $4.3 billion and $4.4 billion.

Our Take

Lithia Motors is the ninth largest automotive retailer in the U.S. With 92 stores in 11 states, the company provides 27 new vehicle brands along with all brands of used vehicle. Currently, it retains a Zacks Rank #2 (Buy).

AutoNation Inc. (AN - Free Report) , another prominent automotive retailer in the U.S., posted a 13.6% rise in earnings per share to 75 cents in the third quarter compared with 66 cents in the same quarter of 2012. However, earnings per share missed the Zacks Consensus Estimate by 3 cents. Improvement in earnings per share was driven by better gross profit earned in all business sectors.

Revenues increased 13.7% to $4.47 billion, in line with the Zacks Consensus Estimate. The revenue growth was attributable to strong performance in all business sectors. The company’s Domestic segment was the biggest gainer in the quarter.

Some other stocks that are performing well in the industry where Lithia Motors operates include Asbury Automotive Group, Inc. (ABG - Free Report) and Penske Automotive Group, Inc. (PAG - Free Report) , both carrying a Zacks Rank #2 (Buy).

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