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Lithia Motors Inc Class A LAD

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Morningstar’s Analysis

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Third-Quarter Results Show Lithia Motors Continues to Thrive Despite a Recession

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.

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Company Profile

Business Description

Lithia Motors is a retailer of new and used vehicles and related services. The company offers 30 brands of vehicles at about 200 stores throughout the western United States and East Coast. The company has expanded largely through the acquisition of dealerships in smaller regional markets and via deals in New York and Southern California. Annual revenue in 2019 was $12.7 billion. In 2019, new-car sales were about 54% of total revenue. Lithia was founded in 1946, went public in 1996, and is now one of the largest U.S. auto dealerships. It is based in Medford, Oregon.

Contact
150 N. Bartlett Street
Medford, OR, 97501
T +1 541 776-6401
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 14,320

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