A month has gone by since the last earnings report for Lithia Motors (LAD). Shares have added about 14.1% 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 catalysts.
Lithia Q3 Earnings Beat Expectations, Revenues Rise Y/Y
Lithia reported third-quarter 2024 adjusted earnings per share of $8.21, which declined from the prior-year quarter’s $9.25 but surpassed the Zacks Consensus Estimate of $7.59. Higher-than-expected revenues from used vehicle wholesale and aftersales segments led to the beat. The auto retailer clocked revenues of $9.2 billion, which increased 11.4% year over year but missed the Zacks Consensus Estimate of $9.4 billion.
Segmental Performance
New vehicle retail revenues increased 14% year over year to $4.43 billion but missed our estimate of $4.46 billion due to a lower-than-expected average selling price (ASP). New vehicle units sold rose 15.5% from the prior-year quarter’s levels to 94,964 units, topping our estimate of 94,891 units. The ASP of new vehicle retail decreased to $46,649 from $47,279 reported in the prior-year quarter. Our estimate was $47,051.3. The gross margin in this segment contracted 230 basis points (bps) to 6.9% amid high cost of sales, which flared up 16.9% year over year to $4.1 billion.
Used vehicle retail revenues rose 8.5% year over year to $2.8 billion but missed our estimate of $2.9 billion. Lower-than-anticipated number of units sold and ASP resulted in underperformance. The used-vehicle retail units sold rose 18.4% from the year-ago quarter to 104,898 units, missing our expectation of 104,901 units. The ASP of used vehicle retail was $27,105, dropping 8.3% year over year. Our estimate was of $27,990. The gross margin in the segment declined 60 bps to 6.6% amid high cost of sales, which rose 9.2% year over year.
Revenues from used vehicle wholesale rose 23.7% to $390.9 million and were above our estimate of $326.1 million. Revenues from aftersales were up 20.9% from the prior-year period’s level to $1 billion, outpacing our estimate of $954.4 million. The company’s finance and insurance revenues rose 3.1% to $360.4 million but fell short of our estimate of $363.5 million. Revenues from fleet and others were $183.6 million, which fell 31.4% year over year and missed our expectation of $283.7 million.
Same store new vehicle revenues increased 1.3% year over year while same store used vehicle retail sales declined 14.6%. Same store revenues from finance and insurance fell 6.7%, while that of the aftersales unit rose 5.1%.
Financial Tidbits
Cost of sales jumped 12.8% year over year in third-quarter 2024. SG&A expenses were $943.6 million, up 10.9% from $850.8 million reported in the year-ago quarter. Adjusted SG&A, as a percentage of gross profit, was 66%. Pretax and net profit margins declined from the year-ago levels.
The company declared a quarterly dividend of 53 cents, to be paid on Nov. 15, 2024, to shareholders of record as of Nov. 8, 2024. So far this year, LAD has repurchased nearly 986,000 shares at an average price of $260. Currently, Lithia has approximately $560.9 million shares remaining under its buyback authorization.
Lithia had cash/cash equivalents/restricted cash of $359.5 million as of Sept. 30, 2024, down from $941.4 million as of Dec. 31, 2023. Long-term debt was $6.4 billion as of Sept. 30, 2024, up from $5.5 billion as of Dec. 31, 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Lithia Motors has a strong Growth Score of A, 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 A. 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 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.
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