Lithia Motors (NYSE:LAD) Stock Price Up 5.2% on Better-Than-Expected Earnings

Key Points

• Lithia Motors beat third-quarter expectations: EPS came in at $10.34 versus the $9.70 consensus, while revenue reached $9.95 billion, up 2.8% year over year. Shares rose about 5.2% following the announcement.
• Operating performance and capital returns improved: Used-vehicle retail gross profit per unit, aftersales margins, and Driveway Finance income increased, while the company repurchased $85 million of stock and raised its quarterly dividend 7.1% to $0.75 per share.
• Risks and mixed sentiment remain: Lithia carries elevated leverage and a low quick ratio, and analyst opinions range from buy to hold, producing a “Moderate Buy” consensus with an average price target of $402.60.

Lithia Motors, Inc. (NYSE:LAD - Get Free Report) rose 5.2% during mid-day trading on Thursday following a better than expected earnings announcement. The company traded as high as $287.20 and last traded at $283.1740. 55,409 shares traded hands during mid-day trading, a decline of 82% from the average session volume of 313,209 shares. The stock had previously closed at $269.13.

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

Lithia Motors Increases Dividend

The company also recently disclosed a quarterly dividend, which will be paid on Friday, November 20th. Investors of record on Friday, November 6th will be issued a $0.75 dividend. This is an increase from Lithia Motors's previous quarterly dividend of $0.70. This represents a $3.00 annualized dividend and a yield of 1.1%. The ex-dividend date of this dividend is Friday, November 6th. Lithia Motors's dividend payout ratio is presently 9.29%.

Lithia Motors News Summary

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

• Positive Sentiment: Q3 earnings and revenue exceeded expectations. Adjusted earnings were $10.34 per share versus the $9.70 consensus estimate, while revenue reached approximately $9.95 billion compared with expectations of $9.75 billion. Revenue increased 2.8% year over year, and adjusted EPS rose 9%. Lithia Motors Tops Q3 Earnings and Revenue Estimates
• Positive Sentiment: Core operating metrics improved. Used retail gross profit per unit increased 11% year over year, aftersales gross margin rose to 59.5% on a same-store basis, and Driveway Finance income jumped 69% to $32.3 million. Record finance originations of $937 million also indicate solid demand for the company’s financing operations. Lithia Three Key Takeaways
• Positive Sentiment: Capital returns increased. Lithia repurchased $85 million of stock during the quarter and announced a 7.1% dividend increase, raising the quarterly payout to $0.75 per share, or $3.00 annualized. Lithia Third Quarter Results
• Neutral Sentiment: Management’s earnings call provides additional detail on sales trends, financing, margins, and the company’s outlook for investors. Lithia Motors Q3 Earnings Call Transcript
• Negative Sentiment: Technical and balance-sheet concerns remain. LAD trades below its 50-day and 200-day moving averages, while its debt-to-equity ratio is 1.46 and quick ratio is 0.21. These factors may limit the market’s reaction to the earnings beat despite the improved results.

Analyst Ratings Changes

LAD has been the topic of a number of research analyst reports. Wall Street Zen raised Lithia Motors from a "sell" rating to a "hold" rating in a report on Saturday, August 1st. Barclays lowered their price target on Lithia Motors from $415.00 to $375.00 and set an "overweight" rating for the company in a report on Tuesday, October 6th. Wells Fargo & Company upped their price target on Lithia Motors from $306.00 to $395.00 and gave the company an "equal weight" rating in a research report on Thursday, July 30th. JPMorgan Chase & Co. dropped their price target on Lithia Motors from $340.00 to $320.00 and set a "neutral" rating on the stock in a research report on Tuesday, October 6th. Finally, Jefferies Financial Group restated a "buy" rating and set a $490.00 price objective on shares of Lithia Motors in a research note on Thursday, July 30th. Six analysts have rated the stock with a Buy rating and six have issued a Hold rating to the company's stock. According to data from MarketBeat, the company currently has a consensus rating of "Moderate Buy" and an average price target of $402.60.

Insider Buying and Selling at Lithia Motors

In related news, Director Stacy Congdon sold 75 shares of the stock in a transaction dated Friday, September 11th. The shares were sold at an average price of $370.73, for a total transaction of $27,804.75. Following the sale, the director owned 2,300 shares in the company, valued at $852,679. This represents a 3.16% decrease in their ownership of the stock. The transaction was disclosed in a legal filing with the Securities & Exchange Commission, which is available through this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. 1.08% of the stock is currently owned by corporate insiders.

Hedge Funds Weigh In On Lithia Motors

A number of hedge funds and other institutional investors have recently bought and sold shares of LAD. Fifth Third Wealth Advisors LLC grew its holdings in shares of Lithia Motors by 3.8% during the first quarter. Fifth Third Wealth Advisors LLC now owns 984 shares of the company's stock valued at $246,000 after purchasing an additional 36 shares during the last quarter. GAMMA Investing LLC lifted its holdings in shares of Lithia Motors by 32.1% in the 2nd quarter. GAMMA Investing LLC now owns 173 shares of the company's stock worth $50,000 after purchasing an additional 42 shares during the last quarter. Crumly & Associates Inc. lifted its holdings in shares of Lithia Motors by 3.6% in the 2nd quarter. Crumly & Associates Inc. now owns 1,246 shares of the company's stock worth $362,000 after purchasing an additional 43 shares during the last quarter. Abel Hall LLC boosted its position in Lithia Motors by 6.1% during the 3rd quarter. Abel Hall LLC now owns 777 shares of the company's stock valued at $227,000 after purchasing an additional 45 shares during the period. Finally, IFP Advisors Inc boosted its position in Lithia Motors by 2.6% during the 2nd quarter. IFP Advisors Inc now owns 2,151 shares of the company's stock valued at $625,000 after purchasing an additional 55 shares during the period.

Lithia Motors Stock Up 5.8%

The firm has a market cap of $6.26 billion, a price-to-earnings ratio of 9.44, a price-to-earnings-growth ratio of 0.69 and a beta of 1.27. The stock has a 50-day moving average of $333.62 and a 200-day moving average of $315.12. The company has a current ratio of 1.00, a quick ratio of 0.21 and a debt-to-equity ratio of 1.46.

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.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.