6. Lithia Motors Inc. (NYSE:LAD)
Number of Hedge Fund Investors: 39
Lithia Motors Inc. (NYSE:LAD) is a leading U.S. automotive retailer with a strong presence in both new and used vehicle sales. Lithia Motors Inc. (NYSE:LAD) has demonstrated impressive financial health, marked by steady revenue growth, solid profits, and positive cash flow.
Lithia Motors Inc. (NYSE:LAD) is also focusing on improving its online sales and digital capabilities, which aligns with the increasing trend toward e-commerce in the automotive industry. Additionally, Lithia Motors Inc. (NYSE:LAD)’s track record of successful acquisitions helps it expand its market reach and improve operational efficiency, positioning it well for future growth.
Financial analyst Diesel views Lithia Motors Inc. (NYSE:LAD) as a strong long-term investment due to its history of strong performance. Over the past decade, Lithia Motors Inc. (NYSE:LAD) has grown its free cash flow at a 25% annual rate, well above its peers. Additionally, Lithia Motors Inc. (NYSE:LAD) has demonstrated strong financial performance, with a revenue growth of 13.8% and a non-GAAP EPS of $7.87 for the quarter, exceeding analysts’ expectations of $7.04.
Bryan DeBoer, CEO of Lithia Motors, shared the following during their latest earnings call:
“Now on to key results for the second quarter. Lithia and Driveway grew revenues to $9.2 billion up 14% from Q2 of last year. While vehicle operations experienced headwinds as a result of the CDK outage, prior to the outage, Q2 had strong improvements in our same-store sales and delivered good momentum in our cost savings efforts.
Diving into same-store sales performance, total same-store revenues were down 6.4% and gross profits declined 12.5%. Consumers remain resilient despite recent trends that reflect challenges from affordability and higher interest rates with unit sales in the quarter down only 3%. Total vehicle gross profit per unit remained resilient in the quarter at $47.62 similar to last quarter and down $951 compared to the same period a year ago. Our aftersales business was down 1.4% in the quarter. This decline is primarily related to CDK which drove after sales down almost 40% during the 12 days of the outage. We expect some of the work will be deferred into early July as our systems and processes return to normal. Our teams have been nimble and responsive, and we do not expect any long-term impacts.
Our investment adjacencies are maturing nicely as they move towards sustainable and considerable profitability. Financing operations produced strong results with income of $7.2 million in the quarter compared to $18.7 million loss last year, achieving profitability earlier than expected. Driveway and GreenCars burn rates have also been reduced by 40% compared to a year ago as we continue to refine our e-commerce strategies, improve operating and advertising efficiencies and convert new customers. All in, we generated adjusted diluted earnings per share of $7.87 a decrease of 28% from Q2 of last year with an estimated $1.10 impact from the CDK outage. We saw clear strength in operational performance in the second quarter, and we’re on pace for nearly a 50% increase in sequential EPS.
We continue to focus on unlocking the profitability of our ecosystem by decisively acting to meet customer demands and operate efficiently by delivering on our core strength execution. Moving on to our unique and extremely difficult to replicate strategy. The foundation of the LAD strategy is our vast physical network built upon the industry’s most talented people, highest demand inventory and dense physical network. We continue to build the most extensive physical network in North America and the UK, adding new stores, foundational adjacencies and strategic partnerships, such as wheels, to expand our customer experiences and diversify our portfolio. Operating in the largest addressable retail market in the world, we continue to strengthen our ability to profitably grow across all elements of our business.”
