) sees growth in earrings estimates and could see a dividend hike
in 2013. The stock is a Zacks #1 Rank (Strong Buy).
Lithia Motors is an automotive franchisee and retailer of new and
used vehicles. It sells new and used cars and light trucks. They
offer replacement parts and service, vehicle maintenance, warranty,
paint, and repair services. As of May 1, 2012, the company offered
25 brands of new vehicles and various brands of used vehicles in 84
stores, as well as online at Lithia.com. Lithia Motors, Inc. was
founded in 1946 and is headquartered in Medford, Oregon.
Lithia Motors posts Seven Straight Positive Earnings
Lithia Motors has topped the Zacks Consensus Estimate in each of
the last seven quarters. The seven beats have come in on average
more than $0.13 higher than the Zacks Consensus Estimate. On
average, the positive earnings surprises were a massive 47%. The
stock has generally reacted positively when the company beats
expectations. The stock was up 5.6% on average following the
positive earnings surprises.
The largest price movement in the stock came the day after the
company posted its second strongest surprise. The March 2011
quarter saw the company beat the topline estimate of $531 million
by posting revenues of $603 million. EPS of $0.34 was $0.14 higher
than the Zacks Consensus Estimate. In the session following
positive earnings surprise the stock increased by 18.7%.
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Lithia Motors Most Recent Reported Earnings
On April 25, 2012 Lithia Motors reported revenue of $759 million,
approximately $73 million higher than the Zacks Consensus Estimate
and up from $603 million reported in year ago quarter, an increase
of 26%. In addition, earnings per share came in at $0.60, $0.18
higher than the Zacks Consensus Estimate of $0.42. The beat of 42%
helped lift the stock higher by 8.5% in the session following the
Lithia Motors Sees Estimates Moving Higher
Lithia Motors has seen earnings estimates move higher following the
recent positive earnings surprise. The Zacks Consensus Estimate for
2012 was as low as $2.04 in January 2012 and has since moved to
$2.49. That represents an increase of more than 22%.
Estimates for 2013 have also seen an increase following the most
recent quarterly release. Over the same time period as the 2012
earnings estimate increase, the Zacks Consensus Estimate for 2013
stood at $2.30 and has since moved to $2.73. The increase of 18%
for 2013 is part of the key driver for the stock. Growth in
earnings is key if there is going to be growth in the dividend,
something the growth and income investors love to see.
The valuation for Lithia Motors is very attractive. A trailing PE
of 11.3x is well below the industry average of 23x and the forward
PE of 10x is also far below the 17x industry average. The price to
book multiple of 1.7x shows the company trading at a discount to
the industry average of 3.1x and price to sale of 0.2x is well
below the 0.8x industry average. Growth and income investors may
have to complete with value investors when they look at the
valuation for Lithia Motors.
Now that I have covered the growth side of this play, let's take a
look at the dividend. The company paid a $0.10 dividend on May 9,
2012. That bring the current yield to 1.6%. The previous four
quarters saw $0.07 dividends, and four previous to that were $0.05
dividends. The recent growth in the dividend is a good to see, and
increases in earnings estimates point to further dividend increases
in the future. Prior to the financial crisis years of 2008 and
2009, LAD paid a $0.14 quarterly dividend to shareholders.
The dividend was suspended throughout 2009, and reinstated in 2010.
Since the dividend came back, it has increased two times. A two
cent increase in 2011 and now a three cent increase in 2012. It is
a safe bet that the dividend could increase four cents in 2013 to
return to the $0.14 quarterly level that was last paid to
shareholders in 2008.
A quick look at the two year price chart shows both growth and
income investors just what they want to see. A consistent up and to
the right trend is once in a while broken by a few downtrends.
Crossing the 200 day moving average one time ended up being a
wonderful buying opportunity for both growth and income investors.
The recent pullback in shares makes them very attractive on both a
valuations and potential for an increased dividend in 2013. Lathia
Motors is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for
Zacks.com. He is also the Editor in charge of the
Run Investor service
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LITHIA MOTORS (LAD): Free Stock Analysis Report
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