Lithia Motors Slips as Earnings Disappoint

Being a car dealer these days is a tough business. For a while, cars were impossible to get, thanks to supply chain issues and slumping production. Now, production is firing back up, just as loans are increasingly harder to get and more expensive, and repossessions are kicking in, threatening to glut the field. Lithia Motors (NYSE:LAD) is taking the brunt of these changes on the chin, and its earnings report left investors cold, sending the stock down slightly in Wednesday afternoon trading.

Objectively, Lithia had a fairly good quarter. It turned in earnings per share of $8.44. However, analysts were looking for earnings of $8.81 per share, so that didn’t help matters much. Worse, Lithia’s revenue also missed analysts’ expectations. It came in at $7 billion, which faltered against the $7.28 billion analysts looked for. Lithia’s CEO, Bryan DeBoer, noted that the company did have a strong quarter—if perhaps not as strong as analysts looked for—and that it would continue to work to “…expand our network, grow DFC…increase our profitability in the long term and progress toward the goals…”

The biggest problem for Lithia and other auto dealers is, as mentioned before, increasing supplies and declining loan rates. Not only are there many, many more cars available for shoppers to purchase, but shoppers have a much, much harder time finding them. Therefore, there are fewer customers available to buy, and auto dealers must now compete to win their business. That’s hitting prices hard and turning what was a seller’s market a few months ago into a buyer’s market today.

However, despite this potential trouble, analysts are still very much in on Lithia Motors. Analyst consensus calls LAD stock a Moderate Buy, with four Buy ratings, three Holds, and one Sell. Further, with an average price target of $274.57, it comes with 23.35% upside potential.

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