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Why Is Lithia Motors (LAD) Up 2.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Lithia Motors (LAD - Free Report) . Shares have added about 2.9% 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 Q1 Earnings Miss Mark and Inch Down Y/Y

Lithia reported first-quarter 2023 adjusted earnings of $8.44 per share, which decreased from the prior-year quarter’s $11.96. The bottom line also missed the Zacks Consensus Estimate of $8.64 per share.

Lower-than-expected revenues from used vehicle retail, service, body and parts, finance and insurance and fleet and others segments caused the downslide. Total revenues jumped 4% year over year to $6,973.8 million, but the top line lagged the Zacks Consensus Estimate of $7,063 million.

Segmental Performance

New vehicle retail revenues increased 7.1% year over year to $3,278.9 million, surpassing the Zacks Consensus Estimate of $3,205 million. New vehicle units sold rose 4.4% from the prior-year quarter to 67,796 units and beat the consensus metric of 63,901 units. The average selling price of new-vehicle retail increased to $48,364 from $47,146 in the prior quarter, beating the consensus mark of $46,125. However, gross margin of this segment decreased 290 basis points (bps) to 10.2% amid high-cost sales, which flared up 10.7% year over year.

Used-vehicle retail revenues fell 0.3% year over year to $2,227.5 million and fell short of the Zacks Consensus Estimate of $2,269 million. The used-vehicle retail units sold grew 6% from the year-ago quarter to 78,142 units, surpassing the consensus metric of 75,550 units.

The average selling price of used-vehicle retail was $28,506, decreasing 6% year over year but beating the consensus mark of $27,985. The gross margin in the segment came down 260 bps to 7.4%. Revenues from used-vehicle wholesale inched down 7.5% to $356.7 million but outpaced the consensus mark of $345 million.

Revenues from service, body and parts were up 17.3% from the prior-year period to $736.3 million, lagging the Zacks Consensus Estimate of $744 million. The gross margin in the segment increased 120 bps to 53.6%. The company’s finance and insurance revenues grew 1.6% to $318.3 million, but missed the consensus estimate of $326 million. Revenues from fleet and others were $56.1 million, down 31.8% year over year, lagging the consensus mark of $101 million.

Same-store new-vehicle revenues fell 3.2% year over year and the same-store used-vehicle retail sales decreased 8.9%. The same-store revenues from the finance and insurance dipped 6.8%, while that of the service, body and parts unit grew 9.4%.

Financial Tidbits

Cost of sales jumped 6.2% year over year in first-quarter 2023. SG&A expenses were $764.4 million, increasing 3.3% from $739.9 million in the year-ago quarter. Adjusted SG&A as a percentage of gross profit was 62.7%. Pretax and net profit margins declined from the year-ago levels.

The company hiked its dividend by 8 cents and approved a dividend of 50 cents per share, which is to be paid on May 26, 2023, to shareholders of record on Mar 12, 2023.

Lithia had cash/cash equivalents/restricted cash of $299.4 million as of Mar 31, 2023, up from $246.7 million as of Dec 31, 2022. Long-term debt was $5,066 million as of Mar 31, 2023, down from $5088.3 million as of Dec 31, 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, Lithia Motors has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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.


Lithia Motors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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