On August 1, 2024, Lithia Motors Inc (LAD, Financial) released its 8-K filing for the second quarter of 2024. Lithia Motors, a leading retailer of new and used vehicles and related services, reported record revenue but faced challenges in earnings per share (EPS).
Company Overview
Lithia Motors Inc (LAD, Financial) is a prominent retailer of new and used vehicles, offering around 50 brands across nearly 500 stores globally, including the US, Canada, and the UK. The company has grown significantly through acquisitions and aims to expand further in the US and internationally. In 2023, Lithia Motors generated $31 billion in revenue, with new-car sales accounting for about 49% of total revenue. The company is headquartered in Medford, Oregon, and is the largest auto dealer in the US.
Performance and Challenges
For the second quarter of 2024, Lithia Motors Inc (LAD, Financial) reported a 14% increase in revenue to $9.2 billion, falling short of the analyst estimate of $9.46 billion. However, the company's EPS fell short of expectations, coming in at $7.87 per diluted share, a 27% decrease from $10.78 per share in the same period last year. This decline in EPS is significant as it indicates potential challenges in maintaining profitability despite revenue growth.
Financial Achievements
Despite the decline in EPS, Lithia Motors Inc (LAD, Financial) achieved several notable financial milestones. The company reported its first profitable quarter for its financing operations, with Driveway Finance Corporation (DFC) generating $7 million in income. Additionally, DFC originated $562 million in loans, bringing its total portfolio to $3.6 billion. These achievements highlight the company's diversified business model and its ability to generate income from various segments.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Total Revenue | $9.2 billion | $8.1 billion | 14% |
| Net Income | $217 million | $301 million | -28% |
| Diluted EPS | $7.87 | $10.78 | -27% |
Balance Sheet and Cash Flow
As of the end of the second quarter, Lithia Motors Inc (LAD, Financial) had approximately $1.3 billion in cash and cash equivalents, marketable securities, and availability on revolving lines of credit. The company also has unfinanced real estate that could provide additional liquidity of around $0.3 billion. These figures indicate a strong liquidity position, which is crucial for ongoing operations and potential future acquisitions.
Dividend and Share Repurchases
The Board of Directors approved a dividend of $0.53 per share for the second quarter of 2024, payable on August 23, 2024, to shareholders of record on August 9, 2024. Additionally, Lithia Motors Inc (LAD, Financial) repurchased approximately 793,000 shares at a weighted average price of $256, with $613.8 million remaining under the current share repurchase authorization.
Analysis and Conclusion
While Lithia Motors Inc (LAD, Financial) reported record revenue and the first profitable quarter for its financing operations, the decline in EPS and net income highlights challenges in maintaining profitability. The company's strong liquidity position and continued focus on acquisitions and diversification are positive indicators for future growth. However, investors should monitor the company's ability to improve margins and address the factors contributing to the decline in EPS.
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Explore the complete 8-K earnings release (here) from Lithia Motors Inc for further details.
