Company Reports

Lithia's stock rose about 20% intraday on July 29 after the company reported adjusted second-quarter diluted earnings per share up 9% year over year to $10.03, well above the $8.78 LSEG consensus. The company also raised its quarterly dividend by 23% to $0.70 per share.

Lithia Motors' business model is strong because it is the only large publicly traded dealer operating in rural and metro markets. Rural markets are unattractive to larger public dealers, as their management teams have no interest in small cities and they have import and luxury brand mixes more favorable to suburban markets. Nationwide, many Lithia brand stores have no competitors within 100 miles, giving Lithia pricing power.

Lithia's stock rose nearly 10% during April 29 trading after it reported first-quarter adjusted diluted EPS of $7.34 that beat the $6.83 LSEG consensus. Management also repurchased 4% of shares for $258.7 million, saying it saw a large discount to intrinsic value.

Lithia Motors' business model is strong because it is the only large publicly traded dealer operating in rural and metro markets. Rural markets are unattractive to larger public dealers, as their management teams have no interest in small cities and they have import and luxury brand mixes more favorable to suburban markets. Nationwide, many Lithia brand stores have no competitors within 100 miles, giving Lithia pricing power.

Lithia Motors' business model is strong because it is the only large publicly traded dealer operating in rural markets. These markets are unattractive to larger public dealers, as their management teams have no interest in small cities and they have import and luxury brand mixes more favorable to suburban markets. Nationwide, many Lithia brand stores have no competitors within 100 miles, giving Lithia pricing power.

Lithia finished 2025 with fourth-quarter adjusted diluted EPS of $6.74, down 12% year over year on same-store revenue down 0.5% on new vehicle declines. CEO Bryan DeBoer said the company will keep backing up the truck to repurchase Lithia stock.

Lithia reported third-quarter adjusted diluted earnings per share of $9.50, up 16.7% year over year, and same-store sales rose 7.7%. Growth came from all segments, led by used vehicle revenue up 11.8%. Lithia also repurchased 5.1% of its stock in the quarter at $312 per share.

Lithia's second-quarter adjusted diluted EPS rose 30% year over year to $10.24 and beat the $9.24 LSEG consensus. CEO and President Bryan DeBoer expressed frustration on the earnings call regarding the market's focus on quarterly metrics over long-term earnings potential.

Lithia Motors' business model is strong because it is the only large publicly traded dealer operating in rural markets. These markets are unattractive to larger public dealers, as their management teams have no interest in small cities and they have import and luxury brand mixes more favorable to suburban markets. Nationwide, many Lithia brand stores have no competitors within 100 miles, giving Lithia pricing power.

Lithia's first-quarter earnings sent the stock down over 5% during April 23 trading after the company missed the LSEG EPS consensus by a penny. Management also sounded optimistic about 2025 performance despite tariffs.

Lithia Motors' business model is strong because it is the only large publicly traded dealer operating in rural markets. These markets are unattractive to larger public dealers, as their management teams have no interest in small cities and they have import and luxury brand mixes more favorable to suburban markets. Nationwide, many Lithia brand stores have no competitors within 100 miles, giving Lithia pricing power.

Lithia Motors' business model is strong because it is the only large publicly traded dealer operating in rural markets. These markets are unattractive to larger public dealers, as their management teams have no interest in small cities and they have import and luxury brand mixes more favorable to suburban markets. Nationwide, many Lithia brand stores have no competitors within 100 miles, giving Lithia pricing power.

The White House on March 5 said that the 25% tariffs on vehicles imported into the US from Canada and Mexico that began a day earlier will be delayed for one month, provided those vehicles comply with the United States-Mexico-Canada Agreement. The change came after President Donald Trump spoke with the leaders of the Detroit Three, who argued that the tariffs hurt firms such as theirs but not those that export vehicles into the US from nations such as Japan, Germany, and South Korea. White House comments to the media on March 5 indicate that tariffs on all vehicle imports regardless of the country of origin will still commence on April 2, so we think 25% or reciprocal tariffs will start at that time.

The 25% tariffs on all US imports from Canada and Mexico began March 4. These tariffs are punishment for what President Donald Trump feels are inadequate measures by these two nations and China for fentanyl and illegal immigration into the US. Lately, White House rhetoric seems more focused on fentanyl than immigration. We consider these tariffs very bad news for our US autos coverage, but for now, we're leaving our fair value estimates in place.

Lithia finished 2024 with a good fourth quarter and adjusted diluted EPS of $7.79 down 6.4% year over year but beating the $7.24 LSEG consensus. We are not changing our fair value estimate but will reassess all modeling inputs when we roll our model forward for the 10-K. Total revenue rose 20.2% while same-store revenue grew 3.1%. On a same-store basis, only used vehicles and finance and insurance sales declined. Used vehicle affordability remains a challenge for many consumers, with Lithia's same-store used average selling price down 1.6% to $28,478 and its same-store used unit volume down 4.3% while new-vehicle volume rose 7.4%. Used vehicle gross profit per unit, however, only fell 0.9% while new-vehicle GPU dropped by 21%. Management said it sees new-vehicle GPU nearing where the firm expects it to stabilize long term, which is above prepandemic levels. That expectation is $2,300-$2,500, and fourth-quarter same-store new GPU was $3,082, so we expect continued declines throughout 2025 and into 2026. Prepandemic levels were in the low $2,000 range.

We expect trade policy and electric vehicle tax credits to be the US auto industry focus of a second US presidential term for Donald Trump. Emission regulations will also likely come into play, as we don't expect the Trump administration to grant California a waiver to set its own rules under the Clean Air Act of 1970. We also expect Environmental Protection Agency rules for 2027-32 model years issued in March, which, relative to the 2026 rule, call for a nearly 50% reduction in average light vehicle fleet carbon dioxide emissions for 2032 down to 85 grams (73 for cars and 90 for trucks) of C02 per mile, to be reduced or eliminated.

Lithia’s third quarter gave us no reason to change our fair value estimate as the firm’s growth story remains attractive. Adjusted diluted EPS of $8.21 beat the $7.60 LSEG consensus and fell 11% year over year, which is not concerning as sector profits are normalizing after the chip shortage allowed excessive new vehicle gross profit per unit. Same-store revenue fell 6.2%, mostly from a 14.6% used vehicle decline, but same-store new vehicle sales revenue rose 1.3%. Same-store new vehicle GPU declined 27.2% to $3,188 and to $5,170, including the lucrative finance and insurance segment. Management thinks this combined new vehicle GPU figure will eventually normalize in the $4,200-$4,500 range. We believe US industry new light-vehicle inventories will increase to at least the low three million unit range, up from over 2.8 million at the end of the third quarter. Lithia’s same-store new unit sales grew 2% while used fell 9.6%.

Lithia Motors' second-quarter adjusted diluted earnings per share of $7.87 fell 28.2% year over year but beat the $7.03 LSEG consensus despite a $1.10 hit from the cyberattack on dealer management system vendor CDK that started June 19 and lasted into early July. CEO Bryan DeBoer said most of the $1.10 impact is from lost service business, and probably only $0.10-$0.20 of lost business will be made up this year as it’s mostly lost service work, which customers probably didn’t delay. There is also the chance of future business interruption insurance proceeds, but the timing and amount of those payouts are uncertain.

Lithia Motors' business model is strong because it is the only large publicly traded dealer operating in rural markets. These markets are unattractive to larger public dealers, as their management teams have no interest in small cities and they have import and luxury brand mixes more favorable to suburban markets. Nationwide, many Lithia brand stores have no competitors within 100 miles, giving Lithia pricing power.

Lithia Motors' first-quarter results suffered from gross margin coming in lower than were modeling for the full year. Adjusted diluted EPS of $6.11 fell 27.6% year over year and missed the $7.89 LSEG consensus. After the February close of the Pendragon deal in the UK, which is a region that has less lucrative financing operations than US dealers, in the April 24 slide deck management lowered its so-called “future state” (think 2030s) long-term operating margin target by 200 basis points to over 5% from 7%. We include floorplan interest in our midcycle operating margin number, and we have lowered our midcycle operating margin by 30 basis points to 4.2%. These changes reduce our fair value estimate by 11% to $445 from $500. Although this is a large valuation cut, we still find Lithia’s long-term growth story very attractive; however, we think our valuation is one that the stock will need beyond 2024-25 to grow into.