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Lithia Motors Inc Class A LAD

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Lithia Has Another Outstanding Quarter and Sees Upside to Its 2025 Plan

Analyst Note

| David Whiston, CFA, CPA, CFE |

Lithia continues to set the bar in the dealer space with another outstanding quarter and adjusted operating margins reaching an incredible 8%, about double what the company was doing before the pandemic. Third-quarter adjusted diluted EPS of $11.21 beat the Refinitiv consensus of $9.28. We're raising our fair value estimate to $428 from $421, mostly from the time value of money since our last update as well as higher 2021 revenue and gross margin in light of how 2021 is tracking. CEO Bryan DeBoer said current elevated margin levels are sustainable for the next few quarters due to low inventory and an uptick in miles driven. We agree with this prediction because the chip shortage is enabling excellent pricing power for dealers, and although the worst of the shortage we think is happening now, we don’t expect a return to normal until at least the back half of 2022.

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Company Profile

Business Description

Lithia Motors is a retailer of new and used vehicles and related services. The company offers 33 brands of vehicles at over 200 stores in 22 states and entered Canada in mid-2021 with the purchase of Pfaff Automotive. The company has expanded largely through the acquisition of dealerships in smaller regional markets and via deals in New York and Southern California. Annual revenue in 2020 was $13.1 billion and we see over $22 billion possible in 2021. In 2020, new-car sales were about 52% of total revenue. Lithia was founded in 1946, went public in 1996, and is now one of the largest U.S. auto dealerships. It is based in Medford, Oregon.

Contact
150 N. Bartlett Street
Medford, OR, 97501
T +1 541 776-6401
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 14,538

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