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Lithia's (LAD) Latest Buyouts to Add $950M in Annual Sales

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Lithia Motors (LAD - Free Report) recently announced the acquisition of nine Lehman Auto World dealerships. With these buyouts, Lithia has expanded its footprint in South Florida. In November 2021, the company had made its foray in South Florida with the addition of two Audi stores, which significantly bolstered the company’s luxury foothold in the Southeast region.

In addition to the nine Lehman dealerships, it has also purchased two Esserman International stores in Miami-Dade County. These 11 dealerships are expected to add $850 to Lithia’s annualized revenues.

The company also bolstered its presence in Las Vegas with the buyout of Henderson Hyundai and Genesis. This marks Lithia’s eighth purchase in the Las Vegas metro store and is expected to add $100 million in annual revenues. 

Lithia has been riding on a spree of acquisitions, which brought the firm’s total expected annualized revenues acquired to $7 billion in 2021, keeping it well ahead of the schedule laid out in the five-year plan rolled out in July 2020. Lithia targets to generate $50 billion in revenues and $55 in earnings per share by 2025, including 200 plus acquisitions. With the latest buyout, Lithia’s total expected annualized revenues acquired in 2022 so far have reached over $2.1 billion.

Apart from its strategic buyouts, Lithia is benefiting from the digitization ramp-up. Enhanced digital solutions — including the Driveway e-commerce program — are helping Lithia to further boost profitability and market presence. It is the company’s e-commerce home solution, which enables customers to purchase or sell vehicles online and schedule at-home services. Driveway exceeded 15,000 annual transactions run rate in 2021. Encouragingly, more than 97% of the transactions completed on Driveway were new customers. Growth on the platform would serve as a key to longer-term market share gains and earnings accretion. Driveway is targeting $1 billion in revenues in 2022 and further scaling to $9 billion in annual revenues by 2025, thus setting the path for Lithia’s rapid growth.

Thanks to its solid profitability and cash-generating potential, the company remains committed to maximizing shareholders’ value. Year to date, Lithia has bought back approximately 2.1 million shares at a weighted average price of $285, with roughly $116 million remaining under its current authorization.

Zacks Rank & Other Key Picks

Lithia currently sports a Zacks Rank #1 (Strong Buy). Some other top-ranked players in the same space include AutoNation (AN - Free Report) , Group 1 Automotive (GPI - Free Report) and Penske Automotive (PAG - Free Report) . Each of these stocks is Ranked #1.

AutoNation is valued at roughly $7 billion. The Zacks Consensus Estimate for AN’s 2022 earnings has been revised 5.4% upward over the past 60 days. The company has a projected earnings growth rate of 28% for 2022. AutoNation’s strong footprint, large dealer network, aggressive store expansion efforts along with brand extension strategy and alliances are praiseworthy.

Penske is valued at around $8 billion. The Zacks Consensus Estimate for PAG’s 2022 earnings has been revised 3.4% upward over the past 30 days. The company has a projected earnings growth rate of 13.7% for 2022. Penske’s spree of buyouts, low leverage and commitment to maximizing shareholder value augur well.

Group 1 is valued at approximately $2.9 billion. The Zacks Consensus Estimate for GPI’s 2022 earnings has been revised 11.8% upward over the past 60 days. The company has a projected earnings growth rate of 23% for 2022. In 2021, Group 1 completed transactions representing $2.5 billion of acquired revenues. The AcceleRide platform, its online retailing initiative, active at most of the firm’s U.S. dealerships, is likely to aid Group 1’s long-term prospects. 

You can see the complete list of today’s Zacks #1 Rank stocks here