Lithia Motors Inc (LAD) Q1 Earnings: Revenue Surges but Profits Slide Amid Market Adjustments

GuruFocus Research

April 24, 2024 at 10:31 a.m.·3 min read

Record Revenue: Achieved a historic high with first quarter revenue of $8.6 billion, marking a 23% increase year-over-year, surpassing the estimated $8.541 billion.
Net Income: Reported $165 million, a 28% decrease from the previous year, falling short of the estimated $224.26 million.
Earnings Per Share (EPS): Recorded $5.89 per diluted share, down 29% from the previous year's $8.30, significantly below the estimated $7.89.
Dividend Announcement: Declared a quarterly dividend of $0.53 per share, payable on May 24, 2024, to shareholders of record as of May 10, 2024.
Share Repurchase: Repurchased approximately 58,000 shares at an average price of $264.42, with about $451.7 million remaining under the current authorization.
Acquisitions: Completed the acquisition of Pendragon PLCs Fleet Management and UK Motor Divisions, contributing to over $5.4 billion in annualized revenues.
Service, Body, and Parts Revenue: Increased by 24%, highlighting strong performance in after-sales services.

Warning! GuruFocus has detected 5 Warning Signs with LAD.

Lithia Motors Inc (NYSE:LAD) disclosed its financial results for the first quarter of 2024 on April 24, revealing a mixed performance that saw record-breaking revenue growth but a significant decline in profitability. The detailed earnings report is accessible through the company's 8-K filing.

Company Overview

Lithia Motors, a leading global retailer of new and used vehicles, operates nearly 500 stores worldwide, offering around 50 vehicle brands. Founded in 1946 and headquartered in Medford, Oregon, Lithia Motors has grown primarily through acquisitions, focusing on both regional and international markets. The company's revenue reached $31 billion in 2023, with the U.S. market contributing 90% of this figure.

Financial Performance Highlights

The first quarter of 2024 saw Lithia Motors achieving an unprecedented revenue of $8.6 billion, marking a 23% increase from the $7.0 billion reported in the same period last year. This growth significantly outpaced the estimated revenue of $8541.92 million projected by analysts. However, net income told a different story, with a reported $165 million, a 28% decrease from the previous year's $230 million, falling short of the expected $224.26 million. Earnings per share (EPS) also declined to $5.89, compared to the anticipated $7.89.

Operational Challenges and Strategic Adjustments

The automotive industry's ongoing adjustments in inventory and profitability levels have impacted Lithia Motors' earnings. President and CEO Bryan DeBoer highlighted efforts to improve business operations and shift capital allocation strategies from acquisitions to enhancing shareholder returns. This strategic pivot aims to achieve a long-term target of delivering $2 in EPS per billion in revenues.

Key Financial Metrics and Corporate Developments

Despite the challenges, Lithia Motors reported several positive developments, including a 71% increase in monthly unique visitors to its GreenCars platform and a 24% rise in service, body, and parts revenues. The company also expanded its footprint with significant acquisitions, including Pendragon PLCs Fleet Management and UK Motor Divisions, and continued its share repurchase program, buying back 58,000 shares at an average price of $264.42.

Investor Returns and Future Outlook

Lithia Motors declared a quarterly dividend of $0.53 per share, payable on May 24, 2024, to shareholders of record as of May 10, 2024. Looking ahead, the company remains focused on diversifying its business model and enhancing profitability across its operations.

Analysis

While Lithia Motors' revenue growth is commendable, the decline in net income and EPS reflects the broader challenges facing the automotive industry, including fluctuating inventory levels and pricing pressures. The company's strategic adjustments and focus on operational efficiencies are crucial for navigating the current market dynamics and achieving long-term financial targets.

For more detailed information on Lithia Motors Inc's financial performance and strategic initiatives, investors and stakeholders are encouraged to review the full earnings report and stay tuned for updates on the company's progress in upcoming quarters.

Explore the complete 8-K earnings release (here) from Lithia Motors Inc for further details.

This article first appeared on GuruFocus.

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