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Lithia Motors (LAD) Q1 Earnings Beat Estimates, Rise Y/Y

Share price of Lithia Motors Inc. LAD fell 14.4% to $79.14 on Apr 21 due to a decline in the overall market, even though the company reported impressive first-quarter 2016 results. Lithia Motors recorded an 11.5% rise in adjusted earnings per share to $1.55 in the first quarter of 2016 from $1.39 earned in the prior-year quarter. Earnings also surpassed the Zacks Consensus Estimate of $1.54. Adjusted net income surged 9.5% to $40.4 million from $36.9 million in the year-ago quarter.
 

Net income, on a reported basis, was $40.3 million or $1.55 per share compared with $40.7 million or $1.53 per share in the first quarter of 2015.

Revenues for the reported quarter went up 11% to $1.98 billion from $1.79 billion in the year-ago quarter. The upside was driven by improved performance across all the segments. Revenues marginally surpassed the Zacks Consensus Estimate of $1.97 billion.

Revenues from new vehicle retail sales improved 8.8% to $1.1 billion in the quarter. New vehicle retail sales volume increased 6.9% to 32,749 units. Revenues per vehicle rose 1.7% to $33,468.

Revenues from used vehicle retail increased 15.1% to $532.7 million in the quarter. Revenues from used vehicle wholesale went up 4.7% to $65.1 million. Used vehicle retail sales volume improved 13.3% to 27,431 units, with revenues per vehicle rising 1.5% to $19,421.

Revenues from service body and parts went up 13.4% to $196.7 million. Meanwhile, the company’s finance and insurance business recorded a 20.2% rise in revenues to $77.6 million. Revenues from fleet and other decreased 19.4% to $14.6 million.

Gross profit increased 12.4% to $307.2 million in the reported quarter from $273.4 million in the year-ago quarter. Operating income improved 7.4% to $72.9 million from $67.9 million in the first quarter of 2015.

Segment Details

Revenues at the Domestic segment increased 11.3% to $768.9 million as retail new vehicle unit sales rose 6.4% to 10,649 vehicles. The segment’s income declined 20.4% to $21.7 million in the quarter under review.

Revenues at the Import segment went up 13.9% to $865.7 million on a 7.8% rise in retail new vehicle unit sales to 18,114 automobiles. Segment income improved 32.6% to $22.6 million in the reported quarter.

Revenues at the Luxury segment increased 2.9% to $346.8 billion. Retail new vehicle sales rose 5.1% to 4,063 luxury vehicles. Meanwhile, the segment's income declined 36.3% to $4.2 million in the quarter.

Financial Details

Lithia Motors had cash and cash equivalents of $21.6 million as of Mar 31, 2016, down from $45 million as of Dec 31, 2015. Total debt was $629.4 million as of Mar 31, 2016, compared with $645.4 million as of Dec 31, 2015.

Dividend & Share Repurchase

Lithia Motors announced a 25% increase in quarterly dividend to 25 cents per share, up from the prior payout of 20 cents. The dividend will be paid on May 27, to shareholders on record as of May 13, 2016.

From Jan 1 through Apr 21, 2016, the company repurchased 759,000 shares at an average price of $79.80 per share. Under the current share repurchase authorization of $250 million, Lithia Motors has around $236 million available for future repurchase.

Outlook

Lithia Motors expects earnings in the range of $1.86–$1.90 per share for the second quarter of 2016. Also, the company anticipates earnings of $7.30–$7.50 per share for full-year 2016.

Lithia Motors expects revenues between $8.5 billion and $8.6 billion for 2016, compared with the previous projection of $8.4–$8.5 billion, with a 4.5% increase in new vehicle sales and a 9.5% rise in used vehicle sales. Sales from service body and parts will likely increase 7.5% during the year.

Zacks Rank

Lithia Motors currently carries a Zacks Rank #3 (Hold).

Some better-ranked automobile stocks include Cooper Tire & Rubber Co. CTB, Federal-Mogul Holdings Corporation FDML and Superior Industries International, Inc. SUP. All three stocks sport a Zacks Rank #1 (Strong Buy).

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LITHIA MOTORS (LAD): Free Stock Analysis Report
 
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FEDERAL MOGUL-A (FDML): Free Stock Analysis Report
 
COOPER TIRE (CTB): Free Stock Analysis Report
 
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