What's in the Offing for Lithia Motors' (LAD) Q3 Earnings?

Zacks Equity Research

Lithia Motors, Inc. LAD is slated to release third-quarter 2019 results on Oct 23, before the opening bell.

The U.S.-based automotive retailer of new and used vehicles recorded better-than-expected results in the last reported quarter on the back of high same-store sales across all business lines.

As far as earnings surprises are concerned, Lithia Motors has surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 8.04%. This is depicted in the graph below:

Lithia Motors, Inc. Price and Consensus

Lithia Motors, Inc. Price and Consensus

Lithia Motors, Inc. price-consensus-chart | Lithia Motors, Inc. Quote

Which Way are Top and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for third-quarter earnings per share of $3.14 has been revised down by a penny over the past seven days. It calls for a year-over-year increase of 10.95%. The consensus estimate for revenues of $3.24 billion suggests an uptick from $3.09 billion in the prior-year quarter.

Factors Setting the Tone

A diverse physical network and strong brands are expected to have driven Lithia Motors’ sales in third-quarter 2019. Enhanced digital solutions is expected to have boosted profits and market presence for the company. The company is also anticipated to have widened omni-channel capabilities in order to expand and modernize transportation solutions for customers.

With rising prices of new vehicles, customers are more inclined to purchase used vehicles. This is likely to have driven the company’s used vehicle unit, which has been a major growth driver over the last several quarters as well.

With rapid growth in dealership purchases, Lithia Motors’ continued acquisitions are likely to have helped expand market share and cater to varied customer requirements in the quarter. The recent takeovers of Lincoln Morgantown and Hazleton Honda dealerships are worth a mention in this context.

Meanwhile, the quarter is expected to have seen a continuous rise in SG&A expenses, primarily due to acquisition costs and insurance reserves, partially offset by store sales. This is likely to show on its net income results.

The company’s new-vehicle unit sales are expected to have declined in the quarter, majorly because of disrupted distribution of vehicles at stores in Northwest. Also, a huge availability of off-lease used vehicles in the market might have partly contributed to the decline.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Lithia Motors this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Lithia Motors has an Earnings ESP of -0.22%.

Zacks Rank: Lithia Motors sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some companies, which according to our model have the right combination of elements to post an earnings beat in the to-be-reported quarter.

American Airlines Group Inc. AAL has an Earnings ESP of +1.64% and is a #3 Ranked player. The company is anticipated to release third-quarter 2019 earnings on Oct 24.

Alliance Data Systems Corporation ADS is set to report third-quarter 2019 earnings on Oct 24. The company has an Earnings ESP of +1.34% and a Zacks Rank #3.

Allegiant Travel Company ALGT is set to report third-quarter 2019 earnings on Oct 24. The firm has an Earnings ESP of +1.39% and a Zacks Rank #3.

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