Lithia Motors (NYSE:LAD) Shares Gap Up Following Strong Earnings

Key Points

• Lithia Motors shares initially gapped higher after the company reported adjusted EPS of $10.34, beating expectations of $9.70, while quarterly revenue reached $9.95 billion versus the $9.75 billion consensus.
• Key operating metrics remained strong, including an 11% year-over-year increase in used-vehicle retail gross profit per unit and a 69% rise in Financing Operations income to $32.3 million.
• Lithia raised its quarterly dividend by 7% to $0.70 per share and repurchased $85 million of stock. Analysts maintain a “Moderate Buy” consensus with an average price target of $402.60, despite some recent target reductions.

Lithia Motors, Inc. (NYSE:LAD - Get Free Report)'s stock price gapped up before the market opened on Wednesday following a stronger than expected earnings report. The stock had previously closed at $299.53, but opened at $317.95. Lithia Motors shares last traded at $301.7150, with a volume of 38,967 shares trading hands.

The company reported $10.34 earnings per share for the quarter, beating the consensus estimate of $9.70 by $0.64. Lithia Motors had a net margin of 1.88% and a return on equity of 12.16%. The firm had revenue of $9.95 billion during the quarter, compared to the consensus estimate of $9.75 billion. During the same period last year, the firm posted $9.50 EPS. The firm's revenue for the quarter was up 2.8% on a year-over-year basis.

Lithia Motors Increases Dividend

The company also recently announced a quarterly dividend, which was paid on Friday, August 21st. Investors of record on Friday, August 7th were paid a $0.70 dividend. This represents a $2.80 annualized dividend and a yield of 0.9%. The ex-dividend date of this dividend was Friday, August 7th. This is a positive change from Lithia Motors's previous quarterly dividend of $0.57. Lithia Motors's dividend payout ratio is presently 9.29%.

Trending Headlines about Lithia Motors

Here are the key news stories impacting Lithia Motors this week:

• Positive Sentiment: Third-quarter revenue reached approximately $9.9 billion to $9.95 billion, above the FactSet consensus estimate of $9.75 billion. Lithia & Driveway Q3 Revenue Earnings Flash
• Positive Sentiment: Adjusted earnings per share were $10.34, beating the $9.70 consensus by $0.64. Diluted EPS was $13.22, up 54% year over year, while adjusted diluted EPS increased 9%. Lithia & Driveway Q3 Adjusted EPS Earnings Flash
• Positive Sentiment: Used-vehicle retail gross profit per unit increased 11% year over year, while aftersales gross profit rose 2.4% and same-store aftersales gross margin expanded 100 basis points to 59.5%. These trends indicate continued strength in key higher-margin operations. Lithia & Driveway Third Quarter Results
• Positive Sentiment: Financing Operations income climbed 69% to $32.3 million, supported by record originations of $937 million and an 18.3% penetration rate.
• Positive Sentiment: Lithia repurchased $85 million of stock during the quarter—1.1% of shares outstanding—and raised its quarterly dividend by 7%, enhancing shareholder returns.

Analyst Ratings Changes

LAD has been the topic of a number of recent analyst reports. Wells Fargo & Company increased their price target on Lithia Motors from $306.00 to $395.00 and gave the stock an "equal weight" rating in a research note on Thursday, July 30th. Bank of America lifted their price objective on Lithia Motors from $350.00 to $417.00 and gave the company a "buy" rating in a research report on Thursday, July 9th. Weiss Ratings lowered Lithia Motors from a "buy (b-)" rating to a "hold (c+)" rating in a research note on Wednesday, October 14th. UBS Group dropped their target price on Lithia Motors from $440.00 to $335.00 and set a "neutral" rating for the company in a research note on Wednesday, October 7th. Finally, Barclays reduced their target price on Lithia Motors from $415.00 to $375.00 and set an "overweight" rating on the stock in a research report on Tuesday, October 6th. Six investment analysts have rated the stock with a Buy rating and six have issued a Hold rating to the stock. Based on data from MarketBeat.com, the company currently has a consensus rating of "Moderate Buy" and a consensus price target of $402.60.

Insider Activity

In related news, Director Stacy Congdon sold 75 shares of the business's stock in a transaction that occurred on Friday, September 11th. The shares were sold at an average price of $370.73, for a total value of $27,804.75. Following the completion of the sale, the director directly owned 2,300 shares in the company, valued at approximately $852,679. The trade was a 3.16% decrease in their ownership of the stock. The transaction was disclosed in a document filed with the Securities & Exchange Commission, which can be accessed through the SEC website. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Corporate insiders own 1.08% of the company's stock.

Hedge Funds Weigh In On Lithia Motors

Institutional investors and hedge funds have recently bought and sold shares of the stock. Rare Wolf Capital LLC increased its position in shares of Lithia Motors by 7.9% in the third quarter. Rare Wolf Capital LLC now owns 7,776 shares of the company's stock worth $2,269,000 after acquiring an additional 572 shares in the last quarter. Abel Hall LLC raised its stake in shares of Lithia Motors by 6.1% in the 3rd quarter. Abel Hall LLC now owns 777 shares of the company's stock valued at $227,000 after acquiring an additional 45 shares during the period. IFP Advisors Inc lifted its holdings in shares of Lithia Motors by 3.4% during the 3rd quarter. IFP Advisors Inc now owns 2,225 shares of the company's stock valued at $649,000 after acquiring an additional 74 shares in the last quarter. NorthCrest Asset Manangement LLC acquired a new position in shares of Lithia Motors during the 3rd quarter valued at $230,000. Finally, GAMMA Investing LLC lifted its holdings in shares of Lithia Motors by 145.1% during the 3rd quarter. GAMMA Investing LLC now owns 424 shares of the company's stock valued at $124,000 after acquiring an additional 251 shares in the last quarter.

Lithia Motors Trading Up 0.2%

The business's 50-day moving average is $335.78 and its two-hundred day moving average is $314.99. The company has a current ratio of 1.00, a quick ratio of 0.21 and a debt-to-equity ratio of 1.46. The stock has a market capitalization of $6.59 billion, a PE ratio of 9.98, a PEG ratio of 0.68 and a beta of 1.27.

Lithia Motors Company Profile

Lithia Motors, Inc is an automotive retailer headquartered in Medford, Oregon. Operating under the Lithia & Driveway name, the company sells new and used vehicles through a network of franchised dealerships and digital retail channels. Its dealerships represent a broad range of domestic, Asian and European automotive brands.

In addition to vehicle sales, Lithia provides related services including vehicle financing and insurance products, parts and maintenance, collision repair, and other after-sales support.

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