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Will Lithia Motors (LAD) Gain on Rising Earnings Estimates?

Lithia Motors (LAD) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

Analysts' growing optimism on the earnings prospects of this auto dealership chain is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Lithia Motors, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $1.51 per share for the current quarter, which represents a year-over-year change of -48.81%.

The Zacks Consensus Estimate for Lithia Motors has increased 11.23% over the last 30 days, as two estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

The company is expected to earn $9.34 per share for the full year, which represents a change of -20.58% from the prior-year number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Lithia Motors. Over the past month, two estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 10.25%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Lithia Motors currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on Lithia Motors because of its solid estimate revisions, as evident from the stock's 22.8% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.


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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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Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

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