Lithia Motors Inc. LAD recorded a 14.8% rise in adjusted earnings per share to $1.78 in the first quarter of 2017 from $1.55 in the prior-year quarter. Moreover, earnings beat the Zacks Consensus Estimate of $1.77 by a penny. Adjusted net income rose almost 11.5% to $45 million from $40.4 million in the year-ago quarter.
Net income, on a reported basis, was $50.7 million or $2.01 per share compared with $40.3 million or $1.55 in the first quarter of 2016.
Revenues for the reported quarter went up 12.8% to $2.24 billion from $1.98 billion in the year-ago quarter. However, the figure missed the Zacks Consensus Estimate of $2.29 billion. Revenues and reported earnings in the quarter were first-quarter records.
Revenues from new vehicle retail sales increased 10.4% to $1.21 billion in the quarter. New vehicle retail sales volume improved 8.8% to 35,616 units. Revenues per vehicle rose 1.5% to $33,982.
Used vehicle retail revenues increased 13% to $602.2 million in the quarter, whereas revenues from used vehicle wholesale rose 9.8% to $71.5 million. Used vehicle retail sales volume improved 12.2% to 30,783 units, with revenues per vehicle inching up 0.7% to $19,563.
Revenues from service body and parts went up 18.3% to $228.4 million. Meanwhile, the company’s finance and insurance business recorded a 21.9% rise in revenues to $84.5 million. Revenues from fleet and other decreased 54.1% to $14 million.
Gross profit increased 18.3% to $232.6 million in the reported quarter from $196.7 million in the year-ago quarter.
Domestic segment revenues increased 16.6% to $899.8 million as retail new vehicle unit sales rose 14.1% to 12,240. The segment’s income improved 10% to $25.4 million in the quarter under review.
Import segment revenues went up 12.6% to $971.5 million on a 10% rise in retail new vehicle unit sales to 19,835 automobiles. Segment income dipped 8.6% to $22.2 million in the reported quarter.
Revenues at the Luxury segment rose 4.9% to $363.8 billion. Retail new vehicle sales fell 11% to 3,616 luxury vehicles. Meanwhile, the segment's income rose 2.8% to $4.7 million in the quarter.
Lithia Motors had cash and cash equivalents of $31.4 million as of Mar 31, 2017, down from $50.3 million as of Dec 31, 2016. Total debt was $684 million as of Mar 31, 2017, compared with $790.9 million as of Dec 31, 2016.
Dividend & Share Repurchase
Lithia Motors announced an 8% hike in the quarterly dividend, taking it to 27 cents per share. The dividend will be paid on May 26, to shareholders on record as of May 12, 2017.
In 2017, the company repurchased 198,000 shares at an average price of $86.41 per share as of Apr 19. Under the current share repurchase authorization of $250 million, Lithia Motors has around $176 million available for future repurchase.
Lithia Motors increased the anticipated earnings range to $8.05–$8.35 per share from $8–$8.30 per share for full-year 2017. The company continues to expect revenues between $9.2 billion and $9.4 billion for 2017.
Lithia Motors outperformed the Zacks categorized Retail/Wholesale Auto/Truck industry in the last three months. During the period, the company lost 6.3% while the industry witnessed an 13.7% decline. Active share repurchase policy and expansion through acquisition should prove beneficial.
Zacks Rank & Key Picks
Lithia Motors currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the auto space include Group 1 Automotive, Inc. GPI, Penske Automotive Group, Inc. PAG and Rush Enterprises, Inc. RUSHA. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Group 1 Automotive has an expected long-term growth rate of 7%.
Penske Automotive has an expected long-term growth rate of 8%.
Rush Enterprises has an expected long-term growth rate of 15%.
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