Lithia Motors (LAD) is up 11% after the company reported better than expected first quarter results and raised earnings guidance for fiscal 2017.
Lithiad is one of the largest car dealers in the country. Lithia sells 30 brands of new vehicles and all brands of used vehicles at 154 stores in 17 states.
- First quarter 2017 revenue increased 13% to $2.2 billion
- Total same store sales increased 3%
- New vehicle same store sales increased slightly
- Used vehicle retail same store sales increased 6%
- Service, body and parts same store sales increased 8%
- Same store finance and insurance per unit grew 5% to $1,353.
"Through a disciplined acquisition strategy and strong operational execution, we're pleased to report our 26th consecutive quarter of record earnings per share," said Bryan DeBoer, President and CEO. "We grew revenue 13% and adjusted earnings 12% over last year and a significant number of stores still have ample opportunity to improve. Since 2010, we have grown our revenue four-fold and our EPS seven-fold, all while currently maintaining a leverage ratio of less than two. The ability to flex our balance sheet coupled with our free cash flow provides capacity to continue acquisitions at a similar or accelerated cadence in 2017 and beyond."
Lithia raised 2017 earnings per share guidance to $8.05-8.35 from $8.00-8.30.
Lithiad also reaffirmed guidance for the following metrics:
- Total revenue of $9.2 to $9.4 billion
- New vehicle same store sales increasing 1.5%; new vehicle gross margin of 5.5% to 5.7%
- Used vehicle same store sales increasing 5.5%; used vehicle gross margin of 11.5% to 11.7%
- Service body and parts same store sales increasing 5.0%; service body and parts gross margin of 48.2% to 48.4%
- Finance and insurance gross profit of $1,285 to $1,310 per unit
More good news for investors: Lithiad also raised its quarterly dividend 8% to $0.27/share.
Sentiment around the auto sector has soured considerably this year as some think auto sales have peaked and there is a bubble brewing in the subprime used car markets.
Lithia trades at ~11x earnings, roughly in-line with its peers, which are also moving higher today: Asbury Auto (ABG) +5%, AutoNation (AN) +4%, Penske (PAG) +4%, CarMax (KMX) +3%.
LAD is recovering nicely today, testing its 50-day moving average after breaking through its 200-day moving average.