Analyst Note| David Whiston, CFA, CPA, CFE |
Lithia reported an all-time record quarter helped by its frenzied acquisition activity as it continues along its five-year goal announced this summer of reaching $50 billion in total revenue, up from $12.7 billion in 2019. Annual acquired revenue in 2020 will be about $2 billion. Adjusted diluted EPS of $6.89 grew 103% from the prior-year quarter and easily beat the Refinitiv consensus of $6.23. Total revenue rose 8.6% while same-store revenue rose 0.7% as low new vehicle inventories and a 9.5% decline in same-store new vehicle unit volume held back growth in other segments, except service which fell 2.9%. Consumers are delaying service work, in our view, which we expect should lead to good growth in a highly profitable segment as soon as 2021. We are raising our fair value estimate to $292 on higher used vehicle revenue growth over our five-year forecast based on how 2020 is trending and due to the time value of money.