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Why Is Lithia Motors (LAD) Down 11.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Lithia Motors (LAD - Free Report) . Shares have lost about 11.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lithia Motors due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Lithia Motors Puts Up a Stellar Show in Q2

Lithia Motors reported second-quarter 2021 adjusted earnings of $11.12 per share, handily beating the Zacks Consensus Estimate of $6.56. Higher-than-expected revenues across all units led to the outperformance. The bottom line increased a whopping 199% from the prior-year quarter’s $3.72 per share. Total revenues also jumped 117.8% year over year to $6,009.4 million. Moreover, the top line surpassed the Zacks Consensus Estimate of $5,006 million. In fact, for the reported quarter, Lithia Motors claims to have reported the highest quarterly earnings and revenues in its history. Thanks to strong results, shares of the company rose 4.38% yesterday to close the session at $371.13.

Segmental Performance

New vehicle retail revenues increased 130% year over year to $3,146.2 million and topped the Zacks Consensus Estimate of $2,464 million. New vehicle units sold climbed 115.6% from the prior-year quarter to 75,176. The average selling price of new-vehicle retail rose 6.7% from the prior-year quarter to $41,852.

Used-vehicle retail revenues rose 95.7% year over year to $1,804.9 million and beat the Zacks Consensus Estimate of $1,525 million. Used-vehicle retail units sold grew 61.5% from the year-ago quarter to 70,254. The average selling price of used-vehicle retail improved 21.2% to $25,691 from the year-ago figure of $21,196. Revenues from used-vehicle wholesale skyrocketed 323.8% year over year to $217.4 million and surpassed the consensus mark of $88 million.

Revenues from service, body and parts were up 89.1% from the prior-year period to $521 million, and outpaced the Zacks Consensus Estimate of $410 million. The company’s F&I (Finance & Insurance) business recorded 115.9% year-over-year growth in revenues to $296.6 million, topping the consensus estimate of $228 million. Revenues from fleet and others were $50.3 million, jumping 197.6% year over year and surpassing the consensus mark of $28.05 million.

While same-store new vehicle sales rose 55.2% year over year, same-store used vehicle retail sales increased 48.8%. While same-store revenues from the F&I business soared 50%, that of the service, body and parts unit grew 30.5% from the prior-year quarter.

Financial Tidbits

Cost of sales jumped 113.5% year over year for second-quarter 2021. However, SG&A — as a percentage of gross profit — decreased from the prior-year level. Encouragingly, pretax and net profit margins improved from the year-ago levels.

Quarterly dividend of 35 cents a share will be payable on Aug 27 to shareholders of record as of Aug 13, 2021.

Lithia had cash and cash equivalents of $780.9 million as of Jun 30, 2021. Long-term debt was $2,521.9 million, marking an increase from $2,064.7 million as of Dec 31, 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 50.34% due to these changes.

VGM Scores

At this time, Lithia Motors has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Lithia Motors has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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