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Why Is Lithia Motors (LAD) Up 10.2% 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 10.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Lithia Q3 Earnings Miss Estimates, Revenues Beat
Lithia reported adjusted earnings of $9.25 per share in third-quarter 2023, which declined from the prior-year quarter’s $11.08 and missed the Zacks Consensus Estimate of $9.97 per share.
Total revenues jumped 13.5% year over year to $8,277 million, outpacing the Zacks Consensus Estimate of $8,151 million.
Segmental Performance
New vehicle retail revenues increased 17.5% year over year to $3,885.8 million, surpassing our estimate of $3,735 million due to an increase in the number of units sold.
New vehicle units sold rose 18.1% from the prior-year quarter’s levels to 82,188 units, beating our estimate of 76,965 units.
The average selling price of new-vehicle retail decreased to $47,279 from $47,531 reported in the prior-year quarter, missing our estimate of $48,528. However, the gross margin in this segment contracted 300 basis points (bps) to 9.2% amid high cost of sales, which flared up 21.5% year over year to $3,526.9 million and crossed our projection of $3,388 million.
Used-vehicle retail revenues rose 6.3% year over year to $2,620.2 million and outpaced our estimate of $2,491.6 million. A higher-than-expected number of units sold resulted in sales outperformance.
The used-vehicle retail units sold rose 9.2% from the year-ago quarter to 88,625 units, outpacing our expectation of 83,368 units. The average selling price of used-vehicle retail was $29,565, dropping 2.7% year over year and missing our projection of $29,886.7. The gross margin in the segment came down 100 bps to 7.2%.
Revenues from used-vehicle wholesale fell 13% to $316.1 million and missed our estimate of $391.8 million.
Revenues from service, body and parts were up 17.7% from the prior-year period’s levels to $838 million, outpacing our estimate of $782.5 million. The gross margin in the segment increased 120 bps to 55.2%.
The company’s finance and insurance revenues rose 4.8% to $349.4 million but missed our estimate of $351.1 million.
Revenues from fleet and others were $267.5 million, up 134% year over year, outpacing our expectation of $95.7 million.
Same-store new-vehicle revenues increased 5.5% year over year and same-store used-vehicle retail sales declined 8.1%.
The same-store revenues from finance and insurance dipped by 3.3%, while that of the service, body and parts unit grew by 4.3%.
Financial Tidbits
Cost of sales jumped 15.5% year over year in third-quarter 2023. SG&A expenses were $850.8 million, up 12.8% from $754.2 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 approved a dividend of 50 cents per share, which is to be paid on Nov 17, 2023, to shareholders of record on Nov 10, 2023.
Lithia had cash/cash equivalents/restricted cash of $256.2 million as of Sep 30, 2023, up from $246.7 million as of Dec 31, 2022. Long-term debt was $5,152.8 million as of Sep 30, 2023, up from $5,088.3 million as of Dec 31, 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Lithia Motors has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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Why Is Lithia Motors (LAD) Up 10.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Lithia Motors (LAD - Free Report) . Shares have added about 10.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Lithia Q3 Earnings Miss Estimates, Revenues Beat
Lithia reported adjusted earnings of $9.25 per share in third-quarter 2023, which declined from the prior-year quarter’s $11.08 and missed the Zacks Consensus Estimate of $9.97 per share.
Total revenues jumped 13.5% year over year to $8,277 million, outpacing the Zacks Consensus Estimate of $8,151 million.
Segmental Performance
New vehicle retail revenues increased 17.5% year over year to $3,885.8 million, surpassing our estimate of $3,735 million due to an increase in the number of units sold.
New vehicle units sold rose 18.1% from the prior-year quarter’s levels to 82,188 units, beating our estimate of 76,965 units.
The average selling price of new-vehicle retail decreased to $47,279 from $47,531 reported in the prior-year quarter, missing our estimate of $48,528. However, the gross margin in this segment contracted 300 basis points (bps) to 9.2% amid high cost of sales, which flared up 21.5% year over year to $3,526.9 million and crossed our projection of $3,388 million.
Used-vehicle retail revenues rose 6.3% year over year to $2,620.2 million and outpaced our estimate of $2,491.6 million. A higher-than-expected number of units sold resulted in sales outperformance.
The used-vehicle retail units sold rose 9.2% from the year-ago quarter to 88,625 units, outpacing our expectation of 83,368 units. The average selling price of used-vehicle retail was $29,565, dropping 2.7% year over year and missing our projection of $29,886.7. The gross margin in the segment came down 100 bps to 7.2%.
Revenues from used-vehicle wholesale fell 13% to $316.1 million and missed our estimate of $391.8 million.
Revenues from service, body and parts were up 17.7% from the prior-year period’s levels to $838 million, outpacing our estimate of $782.5 million. The gross margin in the segment increased 120 bps to 55.2%.
The company’s finance and insurance revenues rose 4.8% to $349.4 million but missed our estimate of $351.1 million.
Revenues from fleet and others were $267.5 million, up 134% year over year, outpacing our expectation of $95.7 million.
Same-store new-vehicle revenues increased 5.5% year over year and same-store used-vehicle retail sales declined 8.1%.
The same-store revenues from finance and insurance dipped by 3.3%, while that of the service, body and parts unit grew by 4.3%.
Financial Tidbits
Cost of sales jumped 15.5% year over year in third-quarter 2023. SG&A expenses were $850.8 million, up 12.8% from $754.2 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 approved a dividend of 50 cents per share, which is to be paid on Nov 17, 2023, to shareholders of record on Nov 10, 2023.
Lithia had cash/cash equivalents/restricted cash of $256.2 million as of Sep 30, 2023, up from $246.7 million as of Dec 31, 2022. Long-term debt was $5,152.8 million as of Sep 30, 2023, up from $5,088.3 million as of Dec 31, 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Lithia Motors has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Lithia Motors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.