Lithia Motors Lags Estimates – Analyst Blog

Lithia Motors (LAD) has posted a profit of 1 cent per share for the fourth quarter of 2009 in sharp contrast to a loss of 16 cents per share in the year-ago quarter. However, the profit is significantly lower than the Zacks Consensus Estimate of 10 cents per share. The company’s results were adversely impacted by weak new vehicle sales at its Chrysler stores.

 

Revenue in the quarter scaled up 5% to $419 million, driven by higher Used Vehicle sales. Same store New Vehicle sales inched up 1.2% while Used Vehicle retail sales rose 17.9% when compared to the prior year. Finance and Insurance same store sales fell 10.2%, while Service, Body and Parts same store sales declined 2.7%.

 

For full year 2009, Lithia’s profit increased to 50 cents per share from 1 cent per share in the previous year. Sales in the year dipped 15.2% to $1.7 billion. Same store New Vehicle sales decreased 23.6%, while retail Used Vehicle sales increased 3.1%. Finance and Insurance same store sales fell 26.2%, and Service, Body and Parts sales decreased 3.3%.

 

 

Lithia had cash and cash equivalents of $13 million as of December 31, 2009, an increase from $11 million as of December 31, 2008. Long-term debt was $444 million as of December 31, 2009. The long-term debt-to-capitalization ratio stood at 59%.

 

 

Lithia has reaffirmed its earnings guidance for 2010 as provided on February 3, 2010. Earnings in the first quarter are projected within a range of 4 cents to 6 cents per share. For full year 2010, earnings are expected in the range of 55 cents–63 cents per share.

 

The guidance for the first quarter is compatible with the Zacks Consensus Estimate of 5 cents per share while it is lower than the Zacks Consensus Estimate of 72 cents per share for full year 2010.

 

 

Over the last 30 days, both the analysts covering the stock have revised downward the estimate for full year 2010. Therefore, our long-term recommendation on the stock remains “Underperform” (Zacks #5 Rank).

 

With respect to earnings surprises, the stock has performed inconsistently over the trailing four quarters. The average earnings surprise was minus 43.20%, implying that Lithia has missed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

 

The current Zacks Consensus Estimates for the first quarter and full-year 2010 are profits of 5 cents and 72 cents, respectively. The upside potential of these estimates, essentially a proxy for future earnings surprises, currently stands at minus 60% and minus 23.61%, respectively.

 

Based in Medford, Oregon, Lithia Motors Inc. operates as an automotive franchisee and retailer of new and used vehicles. It sells new and used cars, and light trucks; replacement parts; and provides vehicle maintenance, warranty, paint, and repair services, as well as offers finance, service contracts, protection products and credit insurance.