America’s love affair with the automobile has come roaring back to life. Lithia Motors, Inc. (LAD) saw sales jump 31% in the fourth quarter as both new and used car sales were in the double digits. This Zacks #2 Rank (buy) expects the good times to continue as it just raised 2011 guidance.
Lithia Motors, as the 9th largest auto retailer in the U.S., is a good barometer on the health of the American consumer. It sells new and used cars, trucks and SUVs in 85 dealerships in both rural and urban areas in many different geographical parts of the country from Alaska, Washington and California to Montana, Iowa and Texas.
The economic recovery continues to be broad based throughout the U.S. All states that Lithia operates in posted double digit increases in same store sales in the fourth quarter.
Surprised By 75% in the Fourth Quarter
Lithia Motors reported fourth quarter results on Feb 23 and surprised by 9 cents per share. It was the 4th consecutive beat in a row. Earnings per share were 21 cents compared to the consensus of 12 cents.
It blew by last year’s loss of 3 cents per share.
Revenue climbed 30.8% to $555.6 million from $424.9 million a year ago. New vehicle sales led the quarter, as they increased 34.4%. Used vehicle sales were also hot, jumping 21.1% whereas service, body and parts increased just 5.4%.
For all of 2010, revenue rose 19.7% to $2.1 billion from $1.8 billion in 2009.
Raised 2011 Outlook
Lithia is bullish on 2011 as it raised its prior 2011 earnings per share guidance to a range of $1.20 to $1.28 from $1.03 to $1.11.
This assumes new vehicle same store sales rising 16% and used vehicle same store sales increasing 10%.
Zacks Consensus Estimates Rise
Given the new guidance, it’s not surprising that analysts moved to raise estimates.
The 2011 Zacks Consensus Estimate jumped to $1.25 from $1.16 in the last month, with 3 estimates revised higher in that time period. That is earnings growth of 33%.
The 2012 Zacks Consensus has also moved higher, rising 3 cents to $1.46 per share in the prior 30 days. Analysts expect earnings growth of 16%.
Still a Value Stock
Lithia Motors continues to trade with attractive valuations even though shares have risen to new 52-week highs. It trades with a forward P/E of just 12.
The company has a price-to-book ratio of 1.2 and a price-to-sales ratio of only 0.2, which means an investor is paying 20 cents for every $1 Lithia makes.
Given that it is expected to grow earnings in the double digits for 2011 and 2012 and its lower P/E ratio, the company also has a PEG ratio of just 0.5 indicating that it has both value and growth.
As an added bonus, Lithia rewards shareholders with a dividend, currently yielding 1.4%.
Shares Have Been Hot
Lithia shares are trading near the 52-week high.
Read the Nov 4, 2010 article.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.
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