A month has gone by since the last earnings report for Lithia Motors (LAD). Shares have added about 21.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lithia Motors due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Lithia Motors Q1 Earnings & Sales Down Y/Y
Lithia Motors reported adjusted earnings per share of $2.01 in first-quarter 2020, which beat the Zacks Consensus Estimate of $1.98. However, the bottom line decreased 18% from the prior-year quarter’s $2.44 per share.
Revenues from new vehicles, used vehicles, F&I and service, and body and parts increased 4%, 22%, 18% and 6%, respectively, in the first two months of 2020. However, lockdown measures to contain the spread of coronavirus hit the company hard in March, which in turn dented overall operating results in the first quarter.
Total revenues fell 1.6% year over year to $2,803.8 million. The figure also missed the Zacks Consensus Estimate of $2,842 million.
New-vehicle retail revenues declined 6% year over year to $1,373.5 million and missed the Zacks Consensus Estimate of $1,559 million. New-vehicle retail units sold decreased 9.5% from the prior-year quarter to 35,907. The average selling price of new-vehicle retail rose 3.9% year over to year to $38,252.
Used-vehicle retail revenues rose 5.6% year over year to $874.4 million but missed the Zacks Consensus Estimate of $956 million. Revenues from used-vehicle wholesale contracted 13.8% year over year to $66.7 million and missed the consensus mark of $81 million. Used-vehicle retail units sold grew 4.8% from the year-ago quarter to 42,631. The average selling price of used-vehicle retail improved 0.8% to $20,510 from the year-ago figure of $20,353.
Revenues from service, body and parts were up 3.9% from the prior-year period to $329.9 million. The company’s F&I business recorded 3.7% year-over-year growth in revenues to $121.9 million. Revenues from fleet and others were $37.4 million, down 22.7% year over year.
While same-store new vehicle sales decreased 10.6% year over year, same store used vehicle retail sales increased 2.7%. While same-store revenues from the F&I business dropped 0.7% year over year, sales from the service, body and parts unit were up 0.5%.
Dividend, Buyback & Financials
Despite coronavirus-led uncertainty that has prompted many companies to suspend payouts, Lithia Motors intends to maintain dividends, in turn preserving shareholder values. The board approved a dividend of 30 cents per share. The amount will be payable on May 22 to shareholders of record as of Mar 8, 2020. Nonetheless, the firm announced the suspension of buybacks when it reported preliminary first-quarter results. On a year-to-date basis, Lithia Motors has repurchased 563,953 shares, with around $188 million remaining under the current buyback authorization.
The company had cash and cash equivalents of $56.6 million as of Mar 31, 2020. Long-term debt was $1.49 billion, marking an increase from $1.43 billion as of Dec 31, 2019. Debt-to-capital ratio stands at 50.6%.
Cost-Cutting Measures Amid COVID-19 Crisis
As mentioned during its preliminary earnings release, Lithia Motors is implementing a number of cost-containment actions in a bid to sail through the coronavirus crisis. Anticipating bleak scenario ahead, the company has reduced its headcount by 37%, mainly through furloughs. It also slashed or put controls on spending for marketing, vendors and inventory. The firm suspended approximately $65 million in planned discretionary capex. All acquisitions have been deferred until the second half of 2020. In a bid to preserve financial flexibility, Lithia Motors also suspended stock buybacks.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 81.61% due to these changes.
Currently, Lithia Motors has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.