Share price of Lithia Motors Inc. (LAD) increased 4.2% to $93.14 on Feb 25 after the company posted a 44.9% rise in adjusted earnings per share to $1.42 in the fourth quarter of 2014 from 98 cents in the corresponding quarter last year. Earnings also surpassed the Zacks Consensus Estimate by 23 cents. Net income surged 45.9% to $37.5 million from $25.7 million in the year-ago quarter.
Revenues for the quarter increased 75% to $1.79 billion from $1.02 billion in the year-ago quarter. The increase in revenues was driven by better performance across all the segments, with the company’s new vehicle sales being the bright spots. Revenues also surpassed the Zacks Consensus Estimate of $1.72 billion.
Revenues from new vehicle sales improved 81.8% to $1.07 billion in the quarter. New vehicle retail sales increased 88.6% to 32,064 units. However, revenues per vehicle decreased by 3.6% to $33,419. On a same-store basis, revenues from new vehicle sales went up 11.9% to $657.5 million.
Revenues from used vehicle retail climbed 61.4% to $409.6 million in the quarter. Revenues from used vehicle wholesale went up 59% to $59.9 million. Used vehicle retail sales improved 55.9% to 21,562 units with revenues per vehicle increasing marginally by 3.5% to $18,996. Same-store revenues from used vehicle retail sales went up 15.7% to $293.1 million and used vehicle wholesale went up 14.7% to $43.2 million.
Revenues from service body and parts went up 71% to $172.4 million. Meanwhile, the company’s finance and insurance business witnessed a 66.9% rise in revenues to $60.1 million. Revenues from Fleet and Other surged 179.2% to $19.9 million.
Gross profit increased 63.9% to $261.1 million from $159.3 million in the year-ago quarter. Operating income improved 44.9% to $66 million from $45.6 million in the fourth quarter of 2013.
2014 Performance
Lithia Motors’s adjusted earnings increased 28.1% to $5.11 per share for full-year 2014 from $3.99 in 2013, exceeding the Zacks Consensus Estimate of $4.88. Revenues for full-year 2014 rose 34.6% to $5.39 billion from $4 billion in 2013. Also, revenues surpassed the Zacks Consensus Estimate of $5.31 billion.
Financial Details
Lithia Motors had cash and cash equivalents of $29.9 million as of Dec 31, 2014, down from $23.7 million as of Dec 31, 2013. Total debt was $641 million as of Dec 31, 2014, compared with $252.6 million as of Dec 31, 2013.
The company had an operating cash flow of $30.3 million in 2014, compared with a cash flow of $32.1 million in 2013.
Store Openings
On Jan 2015, Lithia Motors opened a Subaru franchise store in Clearlake, TX. The company expects that this store will add $45 million to its annual revenues.
In 2014, the company acquired 35 stores and opened one franchise. So far this year, Lithia Motors has opened a new store in the Houston, TX market with Clearlake Subaru.
Dividend
Lithia Motors will pay a dividend of 16 cents per share to shareholders of record as of Mar 13 on Mar 27, 2015.
Outlook
Lithia Motors expects earnings in the range of $1.18–$1.21 per share for the first quarter of 2015, and $5.95–$6.05 per share for full-year 2015. The company expects revenues between $7.5 billion and $7.7 billion for 2015, with a 41.5% increase in new vehicle sales and a 36.5% rise in used vehicle sales. Sales from service body and parts will likely increase 41%. Capital expenditure is expected to be $120 million.
Lithia Motors currently carries a Zacks Rank #2 (Buy). Other well-ranked stocks in the same industry include Asbury Automotive Group, Inc. (ABG), Group 1 Automotive Inc. (GPI) and America's Car-Mart Inc. (CRMT). While Asbury Automotive and Group 1 Automotive sport a Zacks Rank #1 (Strong Buy), America's Car-Mart carries a Zacks Rank #2.
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