It has been about a month since the last earnings report for Lithia Motors (
LAD Quick Quote LAD - Free Report) . Shares have lost about 1.8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.
Lithia Q2 Earnings Top Mark But Inch Down Y/Y
Lithia reported adjusted earnings of $10.91 per share in second-quarter 2023, which declined from the prior-year quarter’s $12.18. The bottom line, nevertheless, surpassed the Zacks Consensus Estimate of $9.19 per share. (reason)
Total revenues jumped 12% year over year to $8,111.5 million, the top line also outpaced the Zacks Consensus Estimate of $7,697 million.
New vehicle retail revenues increased 23.5% year over year to $4,014.7 million, surpassing our estimate of $3,327.5 million due to an increase in vehicle unit sold and average selling price. New vehicle units sold rose 21.5% from the prior-year quarter’s levels to 83,539 units and beat our estimate of 69,169 units. The average selling price of new-vehicle retail increased to $48,258 from $47,281 reported in the prior-year quarter, beating our estimate of $48,106. However, gross margin in this segment contracted 300 basis points (bps) to 9.6% amid high cost of sales, which flared up 27.7% year over year to $3,627.6 million and crossed our projection of $3,011.4 million.
Used-vehicle retail revenues fell 1.7% year over year to $2,455.1 million, but outpaced our estimate of $2,339.8 million. Higher than expected average selling price resulted in sales outperformance. The used-vehicle retail units sold fell 0.6% from the year-ago quarter to 80,573 units, falling short of our expectation of 82,610 units. The average selling price of used-vehicle retail was $30,471, dropping 1.1% year over year, but beating our projection of $28,323.6. The gross margin in the segment came down 80 bps to 8.7%.
Revenues from used-vehicle wholesale increased 5.6% to $403.9 million but missed our estimate of $428.6 million.
Revenues from service, body and parts were up 17.8% from the prior-year period’s levels to $804.4 million, outpacing our estimate of $778.7 million. The gross margin in the segment increased 190 bps to 55.2%. The company’s finance and insurance revenues rose 2.3% to $337.9 million, but missed our estimate of $347.2 million. Revenues from fleet and others were $95.5 million, down 1.8% year over year, lagging our expectation of $141.8 million.
Same-store new-vehicle revenues increased 7% year over year and the same-store used-vehicle retail sales declined 15.8%. The same-store revenues from finance and insurance dipped 6.9%, while that of the service, body and parts unit grew 5.8%.
Cost of sales jumped 14.2% year over year in second-quarter 2023. SG&A expenses were $842.2 million, up 5.7% from $796.9 million in the year-ago quarter. Adjusted SG&A as a percentage of gross profit was 60.4%. Pretax and net profit margins declined from the year-ago levels.
The company approved a dividend of 50 cents per share, which is to be paid on Aug 25, 2023, to shareholders of record on Aug 11, 2023.
Lithia had cash/cash equivalents/restricted cash of $199.7 million as of Jun 30, 2023, down from $246.7 million as of Dec 31, 2022. Long-term debt was $5,414 million as of Jun 30, 2023, up from $5,088.3 million as of Dec 31, 2022.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 11.97% 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. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Lithia Motors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.