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Lithia Motors (LAD) Moves 5.8% Higher: Will This Strength Last?

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Lithia Motors (LAD - Free Report) shares soared 5.8% in the last trading session to close at $358.23. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 11.4% loss over the past four weeks.

Rising demand for vehicles thanks to the preference for personal mobility in the face of a social-distancing milieu, and gradual economic recovery buoyed by widespread vaccination drive as well as unprecedented fiscal stimulus fueled the stock price of the auto retailer. Investors are also upbeat about the company’s acquisition spree, which is boosting its prospects. The buyout of Suburban Collection —closed last month — is expected to add $2.4 billion to the firm’s annualized revenues. Given optimism surrounding the firm, BofA Securities analyst John Murphy upgraded the stock from ‘Neutral’ to ‘Buy’ rating last Friday.

Price and Consensus

Price Consensus Chart for LAD

This auto dealership chain is expected to post quarterly earnings of $5.71 per share in its upcoming report, which represents a year-over-year change of +53.5%. Revenues are expected to be $4.73 billion, up 71.3% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Lithia Motors, the consensus EPS estimate for the quarter has been revised 18.1% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on LAD going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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