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Lithia Motors (LAD)
NYSE:LAD
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Lithia Motors (LAD) AI Stock Analysis

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LAD

Lithia Motors

(NYSE:LAD)

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Outperform 71 (OpenAI - 4o)
Rating:71Outperform
Price Target:
$350.00
▲(9.74% Upside)
Lithia Motors demonstrates strong financial performance with robust revenue growth and improved cash flow. The earnings call provided positive insights into strategic initiatives and growth in key segments. However, technical indicators suggest a bearish trend, and high leverage poses a risk. The stock appears undervalued, offering potential upside.
Positive Factors
Revenue Growth
Consistent revenue growth highlights the company's ability to expand its market presence and capitalize on demand, supporting long-term business sustainability.
Aftersales Profitability
Strong aftersales performance enhances profitability and provides a stable revenue stream, crucial for long-term financial health and competitive advantage.
Cash Flow Improvement
Enhanced cash generation strengthens the company's ability to invest in growth opportunities and manage debt, supporting financial stability.
Negative Factors
High Leverage
High leverage can increase financial risk and limit flexibility, potentially impacting the company's ability to navigate economic downturns.
Margin Pressure
Declining margins suggest challenges in maintaining profitability, which could affect long-term financial performance if not addressed.
SG&A Cost Challenges
Rising SG&A costs can erode profit margins, indicating potential inefficiencies that may need strategic management to sustain profitability.

Lithia Motors (LAD) vs. SPDR S&P 500 ETF (SPY)

Lithia Motors Business Overview & Revenue Model

Company DescriptionLithia Motors, Inc. operates as an automotive retailer in the United States. The company operates through three segments: Domestic, Import, and Luxury. It offers new and used vehicles; vehicle financing services; warranties, insurance contracts, and vehicle and theft protection services; and automotive repair and maintenance services, as well as sells vehicle body and parts under the Driveway and GreenCars brand names. As of February 18, 2022, the company operated through 278 stores. It also offers its products online through 300 websites. Lithia Motors, Inc. was founded in 1946 and is headquartered in Medford, Oregon.
How the Company Makes MoneyLithia Motors generates revenue primarily through the sale of new and used vehicles. The company earns income from the profit margin on these vehicle sales, which includes both the markup on the vehicles themselves and any additional services offered, such as vehicle financing and warranties. In addition, Lithia Motors has significant revenue streams from after-sales services, including vehicle maintenance, repairs, and parts sales. The company also benefits from finance and insurance (F&I) products, where it receives commissions for arranging financing and selling insurance products to customers. Partnerships with various automotive manufacturers and financial institutions also enhance Lithia's revenue, as they allow the company to offer competitive financing options and exclusive vehicle inventory, boosting sales and profitability.

Lithia Motors Earnings Call Summary

Earnings Call Date:Jul 29, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Oct 15, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong revenue and EPS growth, along with significant contributions from aftersales and finance operations. However, challenges in SG&A, same-store sales performance, and the UK market were notable concerns. The company is focusing on strategic initiatives to mitigate these challenges, including share repurchases and leveraging high-margin adjacencies.
Q2-2025 Updates
Positive Updates
Record Revenue and EPS Growth
Lithia & Driveway delivered record revenue of $9.6 billion, with a 4% year-over-year same-store revenue increase. Diluted EPS for the quarter was $9.87 and $10.24 on an adjusted basis, representing increases of 25% and 30% year-over-year, respectively.
Strong Performance in Aftersales
Aftersales gross profit grew 8.5% year-over-year, with gross profit margin widening to 57.8%, a 188 basis point increase. This segment now contributes more than 60% of net income.
Driveway Finance Corporation Success
Driveway Finance Corporation's financing operations income more than doubled year-over-year from $7 million to $20 million, supported by a 50 basis point expansion in net interest margin to 4.6%.
Share Repurchase Strategy
In the first half of the year, the company repurchased 3% of outstanding shares, with plans to allocate up to 50% of free cash flow to further share repurchases.
Negative Updates
SG&A Challenges
SG&A as a percentage of gross profit ticked up to 67.4% from 66.4% year-over-year, reflecting cost pressures amid declining front-end gross profit per unit (GPUs).
Same-Store Sales Performance
While used vehicle units increased 4% year-over-year, new vehicle units only saw a modest 2% increase, and total vehicle gross profit per unit was down $128 compared to the same period last year.
UK Market Conditions
The UK market remains challenging, with higher SG&A footprint affecting overall results despite a 3% year-over-year increase in profitability.
Company Guidance
During Lithia & Driveway's 2025 second quarter earnings call, the company reported a strong set of metrics, highlighting a year-over-year EPS increase of 29% and record revenue of $9.6 billion, with a 4% increase in same-store revenue. Diluted earnings per share reached $9.87 and $10.24 on an adjusted basis, marking a 25% and 30% year-over-year increase, respectively. The quarter also saw robust performance in financing operations, with financing op income more than doubling to $20 million, and aftersales gross profit growing by 8.5% year-over-year, contributing more than 60% to the company's net income. Despite challenges in the macro environment, the company maintained flat SG&A costs and achieved new vehicle units growth of 2% and used vehicle units growth of 4% year-over-year. Lithia's focus remains on store performance, scaling high-margin adjacencies, and leveraging their omnichannel platform to enhance customer engagement and profitability.

Lithia Motors Financial Statement Overview

Summary
Lithia Motors demonstrates strong revenue growth and improved cash flow generation, but faces challenges with declining profit margins and high leverage. The company's financial health is stable, but attention to profitability and debt management is crucial for sustained growth.
Income Statement
75
Positive
Lithia Motors shows strong revenue growth with a TTM increase of 95.4%, indicating robust expansion. However, margins are under pressure, with a declining gross profit margin from 18.65% in 2021 to 15.33% in TTM. Net profit margin is relatively low at 2.40% TTM, suggesting profitability challenges despite revenue growth.
Balance Sheet
65
Positive
The company has a high debt-to-equity ratio of 2.05 TTM, indicating significant leverage, which could pose financial risks. Return on equity is moderate at 13.20% TTM, reflecting decent profitability relative to equity. The equity ratio is stable, but the high leverage remains a concern.
Cash Flow
70
Positive
Free cash flow has improved significantly with a growth rate of 453.65% TTM, showing enhanced cash generation. However, the operating cash flow to net income ratio is low at 0.09, indicating potential cash flow challenges. The free cash flow to net income ratio is healthy at 0.52, reflecting better cash conversion.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue37.16B36.19B31.04B28.19B22.83B13.13B
Gross Profit5.70B5.56B5.23B5.15B4.26B2.22B
EBITDA2.34B2.26B2.16B2.19B1.78B875.80M
Net Income890.90M802.00M1.00B1.25B1.06B470.30M
Balance Sheet
Total Assets24.16B23.13B19.63B15.01B11.15B7.90B
Cash, Cash Equivalents and Short-Term Investments404.40M402.20M941.40M246.70M174.80M162.50M
Total Debt14.30B13.86B11.33B7.99B4.96B4.17B
Total Liabilities17.15B16.45B13.35B9.76B6.48B5.24B
Stockholders Equity6.99B6.66B6.21B5.21B4.63B2.66B
Cash Flow
Free Cash Flow318.90M73.70M-702.60M-913.20M1.54B376.80M
Operating Cash Flow609.40M425.10M-472.40M-610.10M1.80B542.20M
Investing Cash Flow-654.80M-1.85B-1.27B-1.33B-2.89B-1.61B
Financing Cash Flow-220.40M907.60M2.41B2.04B1.11B1.14B

Lithia Motors Technical Analysis

Technical Analysis Sentiment
Negative
Last Price318.93
Price Trends
50DMA
317.56
Positive
100DMA
321.78
Negative
200DMA
326.54
Negative
Market Momentum
MACD
1.02
Positive
RSI
42.56
Neutral
STOCH
30.88
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LAD, the sentiment is Negative. The current price of 318.93 is below the 20-day moving average (MA) of 334.26, above the 50-day MA of 317.56, and below the 200-day MA of 326.54, indicating a neutral trend. The MACD of 1.02 indicates Positive momentum. The RSI at 42.56 is Neutral, neither overbought nor oversold. The STOCH value of 30.88 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LAD.

Lithia Motors Risk Analysis

Lithia Motors disclosed 30 risk factors in its most recent earnings report. Lithia Motors reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Lithia Motors Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
74
Outperform
$4.70B8.7314.30%8.39%40.35%
71
Outperform
$8.18B9.4513.34%0.68%10.25%9.08%
71
Outperform
$5.64B12.0715.20%0.45%19.75%-10.74%
70
Outperform
$8.21B13.6425.67%3.15%-12.49%
63
Neutral
$11.34B11.9617.04%2.91%2.39%5.84%
56
Neutral
$6.73B13.188.40%2.17%28.59%
61
Neutral
$18.38B12.79-2.54%3.03%1.52%-15.83%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
LAD
Lithia Motors
318.93
3.45
1.09%
ABG
Asbury
239.00
0.41
0.17%
AN
AutoNation
217.66
38.74
21.65%
KMX
CarMax
44.86
-32.52
-42.03%
GPI
Group 1 Automotive
435.53
54.19
14.21%
PAG
Penske Automotive Group
171.74
14.10
8.94%

Lithia Motors Corporate Events

Private Placements and Financing
Lithia Motors Announces $600M Senior Notes Offering
Neutral
Sep 3, 2025

On September 3, 2025, Lithia Motors announced the pricing of its $600 million private offering of 5.500% senior notes due 2030, an increase of $100 million from the initial offering size. The proceeds will be used to repay part of its revolving credit borrowings, potentially impacting its financial flexibility and acquisition strategy.

Private Placements and FinancingBusiness Operations and Strategy
Lithia Motors Announces $500 Million Senior Notes Offering
Neutral
Sep 3, 2025

On September 3, 2025, Lithia Motors announced a private offering of $500 million in senior notes due 2030. The proceeds will be used to repay part of its revolving credit borrowings, which may be reborrowed for corporate purposes, including acquisitions and working capital. This strategic financial move is expected to impact the company’s operational flexibility and market positioning.

Private Placements and FinancingBusiness Operations and Strategy
Lithia Motors Expands Loan Agreement by $500 Million
Positive
Aug 8, 2025

On August 6, 2025, Lithia Motors, Inc. announced a Sixth Amendment to its Fourth Amended and Restated Loan Agreement, increasing its total financing commitment from $6.0 billion to $6.5 billion, with potential expansion to $7.0 billion. This amendment includes changes such as reallocating commitments under the Credit Facility and removing Financing Operations interest expense from the fixed charge coverage ratio, which could enhance the company’s operational flexibility and financial strategy.

DividendsBusiness Operations and StrategyFinancial Disclosures
Lithia Motors Announces Cash Dividend Amid Revenue Growth
Positive
Jul 29, 2025

On July 29, 2025, Lithia Motors announced a $0.55 per share cash dividend to be paid on August 22, 2025, following a record second quarter revenue of $9.6 billion, marking a 4% increase from the previous year. The company also reported a 25% increase in diluted earnings per share, driven by operational excellence and strategic acquisitions, positioning itself for accelerated growth in the latter half of 2025.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Sep 26, 2025