Lithia Motors posts record quarter

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Ahead of the market opening on April 21, Lithia Motors Inc. (NYSE: LAD) released results for its first quarter of fiscal 2021, which ended on March 31.

Both revenues and profits grew strongly, setting new records for the company thanks to increased demand for new and used automobiles. The stock was up 1.82% to about $ 381.60 per share as of noon after the news broke.

Income Results

For the quarter, the company reported revenue of $ 4.3 billion, an increase of 55% from the previous year quarter. GAAP earnings per share were $ 5.81 (up 195%), while adjusted earnings per share were $ 5.89 (up 193%). Analysts expected revenue of $ 3.9 billion and adjusted earnings of $ 4.76 per share.

Quarter over quarter, total sales improved 54.9%, retail sales of new vehicles up 59.7%, retail sales of used vehicles increased. up 54.6% and sales of services, bodywork and parts up 22.5%.

Operating profit as a percentage of revenue was 5.6% versus 3.4% last year, while net profit margin was 3.6% versus 1.7%. The gross profit margin remained stable year over year at 16.5%.

Bryan DeBoer, President and CEO of Lithia, said:

“As we enter our 75th year of operations, Lithia & Driveway continued to deliver historic operating results driven by our omnichannel strategy and strength in all four lines of business. , and parts increased slightly after adjusting for one less day of service in 2021… The pandemic only impacted our first quarter 2020 results for the last two weeks of March and the performance of our team this quarter demonstrates our ability to be the leader in consolidating this highly fragmented industry. “

In terms of development, the company opened a new location in Los Angeles and completed the acquisitions of Fields Auto Group in the Greater Orlando area, Florida, Fink Auto Group in Tampa, Florida and Avondale Nissan in Phoenix. The largest acquisition was for The Suburban Collection in the Detroit area. In total, strategic acquisitions are expected to generate $ 3.1 billion in annualized revenue.

At the end of the quarter, the company had $ 170.3 million of cash and cash equivalents on its balance sheet, while long-term debt stood at $ 2.2 billion.

Looking forward to

“With record annualized revenue of $ 6.5 billion earned in the first nine months of our five-year plan, we’re well ahead of schedule and just getting started,” DeBoer said. “With an acquisitions pipeline more active than ever, we are well positioned to continue to aggressively pursue our goal of achieving $ 50 billion in revenue and $ 50 in earnings per share.”

Going forward, the company plans to continue its aggressive growth strategy, driven by acquisitions and connected e-commerce offerings, with the aim of consolidating the most fragmented parts of the automotive retail industry in the United States. .

Evaluation

Given Lithia’s aggressive growth strategy and the success its approach has shown so far in terms of rapidly increasing revenue and bottom line, it would not be surprising if the stock is trading at high valuation multiples. However, the price-earnings ratio of 19.83 is lower than the industry median of 23.15, even though it is higher than the company’s 10-year median price-earnings ratio of 13.08. According to Peter Lynch’s chart, the stock is only trading slightly above its intrinsic value, but over the past two decades, the price has rarely moved far from that line.

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The higher valuation multiples of many US stocks today are helping to make Lithia more attractive, as it only appears overvalued by a narrow margin over how fast it is growing. If the company is able to continue its aggressive growth strategy, it looks likely that the stock still has room to run.

Disclosure: the author does not own any shares in any of the mentioned shares. The mention of stocks in this article does not at any time constitute an investment recommendation. Investors should always conduct their own careful research and / or consult with registered investment advisers before acting in the stock market.

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