Lithia Motors (LAD) AI Stock Analysis

615 Followers

Top Page

Lithia Motors

(NYSE:LAD)

73Outperform

Lithia Motors demonstrates strong financial performance with robust revenue growth and improved leverage management. Valuation suggests the stock may be undervalued, offering potential for appreciation. The earnings call was optimistic, highlighting significant achievements in cost management and revenue growth. However, technical analysis indicates bearish trends, which may pose short-term risks. Overall, the stock presents a balanced risk-reward profile with positive long-term prospects.

Positive Factors

Cost Management

Planned inventory reductions could save $50-$70M in floor plan costs, with another $25-$50M in SG&A savings anticipated.

Earnings

LAD Q3 EPS of $8.21 beat VA consensus of $7.62, driven by SG&A, margin & tax.

Financial Performance

Driveway Finance Corp. reached ~$4B in scale and turned profitable, marking its first profitable year, driven by strong execution.

Negative Factors

Capital Allocation

The company executed a lower-than-anticipated buyback, which may raise questions about capital allocation priorities.

Product Sales

Used units were significantly below expectations, which might become a topic of concern during discussions.

Sales Performance

Sales of $9.2B missed Visible Alpha's consensus of $9.5B.

Lithia Motors (LAD) vs. S&P 500 (SPY)

Market Cap

$7.41B

Dividend Yield0.75%

Average Volume (3M)354.62K

Price to Earnings (P/E)9.5

Beta (1Y)1.22

Revenue Growth16.75%

EPS Growth-18.09%

CountryUS

Employees30,000

SectorConsumer Cyclical

Sector Strength63

IndustryAuto - Dealerships

Share Statistics

EPS (TTM)29.70

Shares Outstanding26,272,446

10 Day Avg. Volume372,671

30 Day Avg. Volume354,623

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.22

Price to Cash Flow (P/CF)32.60

P/FCF Ratio59.30

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$407.71

Price Target Upside44.55% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering8

Lithia Motors Business Overview & Revenue Model

Company DescriptionLithia Motors, Inc. (LAD) is one of the largest automotive retailers in the United States, operating through a network of dealerships across the country. The company is engaged in the retail sale of new and used vehicles, and it also offers vehicle financing, insurance products, and automotive repair and maintenance services. Lithia Motors provides a wide range of vehicle brands and models, catering to diverse customer needs and preferences.

How the Company Makes MoneyLithia Motors generates revenue through multiple streams primarily centered around the sale of new and used vehicles. The sale of new vehicles accounts for a significant portion of its revenue, benefiting from partnerships with a variety of automotive manufacturers that supply a diverse fleet of cars and trucks. Additionally, the company earns from the sale of used vehicles, which often have higher profit margins compared to new vehicles. Another key revenue stream for Lithia Motors is its finance and insurance (F&I) offerings, where the company provides customers with financing options, extended warranties, and other insurance products, generating additional income through interest and service fees. Moreover, Lithia's service and parts division contributes to its earnings by providing maintenance, repair, and parts sales, ensuring continued customer engagement and revenue post-vehicle sale. These combined operations, along with strategic acquisitions and dealership expansion, drive Lithia Motors' overall profitability.

Lithia Motors Financial Statement Overview

Summary

Lithia Motors exhibits strong revenue growth and improved leverage management, positioning itself well in the vehicles industry. However, profitability margins and cash flow conversion remain areas needing attention. While the company has improved its financial stability, further efforts are required to enhance net income margins and cash flow efficiency to sustain long-term growth.

Income Statement

Very Positive

Lithia Motors shows strong revenue growth over the years, with a significant jump from 2020 to 2024. The TTM revenue growth rate is 16.73%, indicating a robust expansion trajectory. Gross profit margin for TTM is 15.02%, reflecting solid profitability. However, the net profit margin decreased to 2.21% in the TTM period, down from 3.22% in 2023, suggesting some pressures on net income. EBIT and EBITDA margins have also seen a decline, indicating potential cost pressures.

Balance Sheet

Positive

The company's debt-to-equity ratio has improved significantly, standing at 0.31 in the TTM compared to 1.82 in 2023, indicating better leverage management. Return on Equity (ROE) is 12.01% for the TTM, showing healthy returns but a decline from 16.10% in the previous year. The equity ratio remains stable at around 28.88%, reflecting a balanced asset financing approach. Overall, the balance sheet shows improved financial stability, although ROE has decreased.

Cash Flow

Positive

Lithia Motors has experienced challenges in cash flow, with free cash flow remaining negative in the TTM at -293 million USD, although slightly improved from -702.6 million USD in 2023. The operating cash flow to net income ratio is 0.05, highlighting issues in converting income to cash. However, the company has managed to improve operating cash flow compared to the significant negative figure last year. The cash flow statement indicates room for improvement in managing operational cash generation.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
36.19B	31.04B	28.23B	22.83B	13.12B
	Gross Profit
5.56B	5.18B	5.15B	4.26B	2.23B
	EBIT
1.58B	1.69B	1.94B	1.67B	697.10M
	EBITDA
2.20B	1.98B	2.12B	1.78B	877.20M
	Net Income Common Stockholders
802.00M	1.00B	1.25B	1.06B	470.30M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
402.20M	941.40M	246.70M	174.80M	160.20M
	Total Assets
23.13B	19.63B	15.01B	11.15B	7.90B
	Total Debt
7.74B	11.33B	7.63B	4.38B	3.86B
	Net Debt
7.34B	10.39B	7.38B	4.20B	3.70B
	Total Liabilities
16.45B	13.35B	9.76B	6.48B	5.24B
	Stockholders Equity
6.66B	6.21B	5.25B	4.66B	2.66B
Cash Flow		Free Cash Flow
73.70M	-702.60M	-913.20M	1.54B	374.40M
	Operating Cash Flow
425.10M	-472.40M	-610.10M	1.80B	542.20M
	Investing Cash Flow
-1.85B	-1.27B	-1.33B	-2.89B	-1.61B
	Financing Cash Flow
907.60M	2.41B	2.04B	1.22B	1.14B

Lithia Motors Technical Analysis

Technical Analysis Sentiment

Negative

Last Price282.06

Price Trends

50DMA

333.58

Negative

100DMA

350.40

Negative

200DMA

319.14

Negative

Market Momentum

MACD

-10.63

Negative

RSI

39.74

Neutral

STOCH

26.99

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LAD, the sentiment is Negative. The current price of 282.06 is below the 20-day moving average (MA) of 298.87, below the 50-day MA of 333.58, and below the 200-day MA of 319.14, indicating a bearish trend. The MACD of -10.63 indicates Negative momentum. The RSI at 39.74 is Neutral, neither overbought nor oversold. The STOCH value of 26.99 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LAD.

Lithia Motors Risk Analysis

Lithia Motors disclosed 29 risk factors in its most recent earnings report. Lithia Motors reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Lithia Motors Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ABG	75 Outperform	$4.18B	9.88	12.76%	―	16.11%	-24.72%
LAD	73 Outperform	$7.41B	9.53	12.47%	0.75%	16.75%	-18.09%
PAG	70 Outperform	$9.46B	10.32	18.50%	3.13%	3.14%	-11.22%
GPI	66 Neutral	$4.98B	10.38	17.23%	0.50%	11.53%	-13.75%
AN	63 Neutral	$6.22B	9.36	29.65%	―	-0.68%	-25.24%
SAH	60 Neutral	$1.90B	9.10	22.11%	2.31%	-1.03%	24.64%
Sector *	59 Neutral	$11.20B	10.09	-1.41%	3.96%	1.31%	-16.95%

* Consumer Cyclical Sector Average

Performance Comparison

LAD

Lithia Motors

282.06

4.89

1.76%

ABG

Asbury

212.58

-12.24

-5.44%

AutoNation

158.55

-0.48

-0.30%

GPI

Group 1 Automotive

382.11

104.85

37.82%

PAG

Penske Automotive Group

141.79

-6.96

-4.68%

SAH

Sonic Automotive

56.16

5.24

10.29%

Lithia Motors Earnings Call Summary

Earnings Call Date: Feb 12, 2025 | % Change Since: -23.37% | Next Earnings Date: Apr 23, 2025

Earnings Call Sentiment Neutral

The earnings call presented a company performing strongly in terms of revenue growth and cost management, with significant improvements in financing operations and new vehicle sales. However, challenges remain in used vehicle sales and aftermarket performance. The sentiment is cautiously optimistic with a focus on future growth opportunities and market share expansion.

Highlights

Record Revenue Growth

Lithia & Driveway grew revenues to a record $9.2 billion, marking a 20% increase from Q4 of last year.

SG&A Cost Management Success

The company achieved its cost savings target, realizing $200 million in annual cost savings and achieving two consecutive quarters of absolute sequential decreases in SG&A.

Strong Financing Operations Performance

Financing Operations segment, primarily driven by DFC, reported profitability of $9 million this quarter compared to a loss of $2 million in the same quarter last year, with expectations of continued profitability growth.

Omnichannel Ecosystem Success

The omnichannel ecosystem has driven substantial improvements in customer engagement and unit sales, reinforcing its effectiveness.

Increase in New Vehicle Units

New vehicle units increased 7.4% year-over-year, with particular strength in import manufacturers.

Lowlights

Decline in Used Vehicle Units

Used vehicle units were down 4.3% year-over-year, although there was strong performance in value orders.

Challenges in Aftermarket Sales

Aftersales revenues were up only 3.4%, which was below expectations and market performance, despite a 19.9% increase in warranty work gross profit.

High Acquisition Multiples

The company noted that acquisition prices remain high, which has led to a focus on share buybacks instead.

Company Guidance

During the fourth quarter of the fiscal year 2024, Lithia Motors reported strong financial results, with a notable 20% increase in revenues, reaching a record $9.2 billion. The company achieved an adjusted diluted earnings per share of $7.79, underscoring the effectiveness of its integrated mobility ecosystem. Lithia & Driveway's operational efficiencies led to the first year-over-year operating profit increase in nine quarters, as they realized their $200 million annual cost savings target. The company also saw growth in new unit sales and maintained stable total vehicle gross profit per unit (GPU). Financing Operations contributed to profitability, with a full-year profit of $15 million, driven by a $3.9 billion portfolio balance. Lithia remains focused on growth, aiming for $2 of EPS per $1 billion in revenue, and has plans to enhance customer experiences through strategic investments and partnerships, as well as potential acquisitions targeting $2 billion to $4 billion in future annual acquired revenues.

Lithia Motors Corporate Events

Executive/Board ChangesShareholder Meetings

Lithia Motors Board Member David Robino Steps Down

Neutral

Mar 3, 2025

On February 27, 2025, David J. Robino informed Lithia Motors, Inc. of his decision not to stand for reelection to the Board of Directors at the 2025 Annual Meeting of Shareholders. Consequently, the Board plans to reduce its size from eight to seven members, which may impact the company’s governance structure.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.