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Lithia (LAD) on Buyout Spree, Acquires Honda Store in Fontana

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Lithia Motors, Inc. (LAD - Free Report) recently announced the acquisition of Rock Honda, a Top 20 Honda New Volume Dealer in the United States. The transaction has been financed through the company’s existing on-balance sheet capacity.

Located in Fontana, CA, Rock Honda was the 16th largest New Volume Honda store in the nation in 2020. Along with vehicle sales and service, Rock Honda is also authorized to provide customers with personal insurance as part of their offerings.

The latest acquisition of Honda (HMC - Free Report) dealership in the Inland Empire has enhanced Lithia’s presence and offerings in the Southwest region. Moreover, the buyout is anticipated to add $170 million in combined annualized revenues.

Lithia is highly optimistic about this buyout. The high-performing, customer-focused store would perfectly complement the company’s existing product portfolio and further expand its omni-channel network. The buyout also introduces a new adjacent business line of personal insurance products, further augmenting Lithia’s ability to provide consumers with transportation solutions. In fact, the buyout aligns with Lithia’s plan to fortify the reach and density of its network, in a bid to serve customers more conveniently.

Lithia had earlier announced an ambitious five-year plan to yield $50 billion in revenues and $50 in earnings per share, including 200 plus acquisitions. The latest buyout brings Lithia’s total expected annualized revenue acquired to date in 2021 to more than $4.9 billion, keeping the company well ahead its schedule of network expansion.

The Oregon-based dealer’s expanding network density is essential to conveniently and affordably cater to customer needs throughout the vehicle-ownership lifecycle.

Lithia is one of the leading automotive retailers of new and used vehicles, and related services in the United States. It offers tailored services complemented through its nationwide network. The buyout of the Honda dealership is in sync with the auto retailer’s proven success strategy of acquiring strong, high-performing franchises. It will also enable the auto retailer to create loyal and satisfied customers in Fontana.

Lithia’s diversified product mix and multiple streams of income reduce the risk profile of the firm. The company generates income from businesses, including used and new vehicle retail, finance, insurance, as well as automotive repair and maintenance. The diversified portfolio positions it well for top- and bottom-line growth.

Of late, the company has been on a buyout binge as it seeks to profitably consolidate auto dealerships into its network. This July, Lithia announced the acquisition of Subaru of Mobile in Alabama and Michael's Subaru in Washington, boosting the company's presence in its Northwest and Southeast regions.

Lithia put up a stellar show in second-quarter 2021 and reported adjusted earnings of $11.12 per share, up a whopping 199% from the prior-year quarter’s $3.72 per share. Total revenues also surged 117.8% year over year to $6,009.4 million. With this, Lithia claims to have reported the highest quarterly earnings and revenues in its history.

Lithia, peers of which include Penske Automotive (PAG - Free Report) and Group 1 Automotive (GPI - Free Report) , currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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