Analyst Note| David Whiston, CFA, CPA, CFE |
Lithia Motors started 2022 with what we see as excellent first-quarter results, and we are not changing our fair value estimate. The trends of massive year-over-year growth from acquisitions as well as strong same-store revenue growth of 11.7% and excellent new and used vehicle pricing due to strong demand and low new vehicle inventory continued. We expect these trends will continue for the rest of the year as we expect the chip shortage recovery will take a long time. Gross profit per new vehicle unit more than doubling to $6,179 on a 20.6% rise in new vehicle units sold and used vehicle GPU up 32% to $3,037 on a 24.8% unit sales rise helped drive total gross profit dollars up 79%, which in turn leveraged overhead costs to an outstanding low level of gross profit of 57.1%—a 550-basis-point improvement versus the prior-year quarter. This improvement drove a 200-basis-point increase in adjusted operating margin to 7.6%, and adjusted diluted EPS of $11.96 more than doubled and beat the Refinitiv consensus of $10.09.