What Makes Lithia (LAD) an Attractive Pick at the Moment?

Lithia MotorsLAD shares have rallied 85.6% over the past three months, outperforming the broader industry gain of 49.7%. The automotive retailer displays a strong surprise record. Its earnings surpassed the Zacks Consensus Estimate in three of the preceding four quarters and missed the same on one occasion, with the average surprise being 2.01%. The company has been witnessing northbound estimate revisions of late. Over the past seven days, the Zacks Consensus Estimate for earnings for the current quarter and fiscal 2020 has increased 25 cents and 38 cents, respectively.

Lithia — whose peers include Group 1 Automotive GPI, Sonic Automotive SAH and AutoNation AN among others — currently carries a Zacks Rank #1 (Strong Buy) and has a VGM Score of A, offering significant investment opportunities to investors. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let's see what makes the stock an attractive investment option at the moment.

The company’s diversified product mix and multiple streams of income bode well. Markedly, these factors reduce its risk profile. The company generates income from six distinct businesses that offer used and new vehicle sales, finance, insurance, as well as automotive repair and maintenance. The diversified portfolio positions it well for top and bottom-line growth.

The firm is widening omni-channel capabilities in order to expand and modernize transportation solutions for customers. A diverse physical network and robust brands will boost the company’s sales. An expanded physical network, combined with enhanced digital solutions, will help Lithia to further boost profitability and market presence. The company aims to expand the proprietary e-commerce home channel to further fuel growth in second-half 2020.

Lithia continuously strives to make acquisitions for increasing market share and catering to customer requirements in a better way. It recently announced the acquisition of the Smolich Chrysler Jeep Dodge Ram and Nissan locations in Oregon. This transaction is expected to generate $100 million in steady state annual revenues for the firm. Further, it completed the buyout of Williams Automotive's Honda and Toyota dealerships in Florida last November. The acquisitions of Lincoln Morgantown and Hazleton Honda dealerships are also anticipated to generate higher returns for the company in the upcoming period.

Lithia witnessed recoveries in June across all business lines from the declines seen in April and May, as states eased shelter-in-place restrictions that were imposed due to the coronavirus outbreak. Significant progress was witnessed in June, with total same-store vehicle unit sales increasing roughly 3% year over year. Notably, sales of the same-store used vehicle unit increased around 23% year over year. The same-store web traffic, reflecting new visits to the company's websites, jumped almost 53% year over year during the reported month. Lithia expects the recovery trend to continue and seems to be positioned well for second-half 2020.

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AutoNation, Inc. (AN): Free Stock Analysis Report
Sonic Automotive, Inc. (SAH): Free Stock Analysis Report
Lithia Motors, Inc. (LAD): Free Stock Analysis Report
Group 1 Automotive, Inc. (GPI): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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