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Lithia's (LAD) Q1 Earnings Miss Estimates, Fall 29% Y/Y

Lithia Motors LAD 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.

Lithia Motors, Inc. Price, Consensus and EPS Surprise

Lithia Motors, Inc. Price, Consensus and EPS Surprise
Lithia Motors, Inc. Price, Consensus and EPS Surprise

Lithia Motors, Inc. price-consensus-eps-surprise-chart | Lithia Motors, Inc. Quote

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.

Zacks Rank & Key Picks

LAD currently carries a Zacks Rank #3 (Hold).

A few top-ranked players in the auto space are Geely Automobile Holdings Limited GELYY, BYD Company Limited BYDDY and Ferrari N.V. RACE, all of which sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Geely is engaged in automobile manufacturing and related areas. The Zacks Consensus Estimates for GELYY’s 2023 sales and earnings imply year-over-year growth of around 57.5% and 7.4%, respectively.

BYD is engaged in the research, development, manufacture and distribution of automobiles, secondary rechargeable batteries and mobile phone components. The Zacks Consensus Estimate for BYDDY’s 2023 sales implies year-over-year growth of around 175%.

Ferrari is engaged in designing, manufacturing and selling sports cars. The Zacks Consensus Estimates for RACE’s 2023 sales and earnings imply year-over-year growth of around 14% and 19.8%, respectively.

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