It has been about a month since the last earnings report for Lithia Motors (
LAD Quick Quote LAD - Free Report) . Shares have added about 28.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lithia Motors due for a pullback? 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 drivers.
Lithia Q3 Earnings Miss Mark and Inch Down Y/Y
Lithia reported third-quarter 2022 adjusted earnings of $11.08 per share, decreasing from the prior-year quarter’s $11.21. The bottom line also missed the Zacks Consensus Estimate of $11.91. Lower-than-expected revenues from new vehicle retail and F&I segments led to the downslide. Total revenues jumped 18.2% year over year to $7,295.7 million. The top line, however, missed the Zacks Consensus Estimate of $7,369 million.
The new vehicle retail revenues increased 14.1% year over year to $3,306.9 million but missed the Zacks Consensus Estimate of $3,443 million. The new vehicle units sold rose 4.3% from the prior-year quarter to 69,743 units but missed the consensus metric of 71,916 units. The gross margin in the segment increased 10 basis points (bps) to 12.2% and crossed the consensus mark of 11.54%. The average selling price of new-vehicle retail rose to $47,416 from $43,325 in the prior quarter and beat the consensus mark of $46,899.
The used-vehicle retail revenues climbed 18.6% year over year to $2,465.8 million and topped the Zacks Consensus Estimate of $2,440 million. The used-vehicle retail units sold grew 6.4% from the year-ago quarter to 81,215 units and crossed the consensus metric of 78,532 units. The gross margin in the segment came down 300 bps to 8.2% and missed the consensus mark of 9.33%. The average selling price of used-vehicle retail was $30,361, increasing from $27,233 and beating the consensus metric of $29,733. Revenues from used-vehicle wholesale jumped 39.2% to $363.2 million and outpaced the consensus mark of $347 million.
The revenues from service, body and parts were up 23.2% from the prior-year period to $712.2 million and crossed the Zacks Consensus Estimate of $692 million. The gross margin in the segment increased 170 bps to 54% and beat the consensus mark of 53%. The company’s F&I business revenues grew 12.2% to $333.3 million, but the figure missed the consensus estimate of $345 million. Revenues from fleet and others were $114.3 million, shooting up 104.5% year over year and exceeding the consensus mark of $81 million.
While the same-store new-vehicle revenues fell 1.9% year over year, the same-store used-vehicle retail sales increased 7.2%. The same-store revenues from the F&I business dipped 1.1%, and that of the service, body and parts unit grew 9%.
Cost of sales jumped 20.1% year over year in third-quarter 2022. SG&A expenses were $749.2 million, increasing 11.3% from $673.3 million in the year-ago quarter. Adjusted SG&A as a percentage of gross profit was 59.6%. Pretax and net profit margins declined from the year-ago levels.
The company approved a dividend of 42 cents per share related to third-quarter 2022 financial results. The dividend is to be paid on Nov 18, 2022, to shareholders of record on Nov 11, 2022.
So far this year, LAD repurchased 2.3 million shares at a weighted average price of roughly $281. Under the current share repurchase authorization, approximately $77 million remains available.
Lithia had cash and cash equivalents of $233 million as of Sep 30, 2022, up from $174.8 million as of Dec 31, 2021. Long-term debt was $5,222.3 million, marking an increase from $3,185.7 million as of Dec 31, 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -6.53% due to these changes.
At this time, Lithia Motors has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lithia Motors has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.