Can Lithia (LAD) Maintain its Earnings Beat Streak in Q3?
Discouragingly, the Zacks model does not predict a Q3 earnings beat for Lithia (LAD), as the auto retailer doesn't possess the right combination of the two key ingredients.
Lithia Motors LAD is slated to release third-quarter 2021 results on Oct 20, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at $9.72 per share and $6.09 billion, respectively.
The auto retailer came up with better-than-expected results in the last reported quarter on higher-than-anticipated sales across all segments. In fact, Lithia surpassed earnings estimates in each of the trailing four quarters, with the average being 28.3%. This is depicted in the graph below:
Lithia Motors, Inc. Price and EPS Surprise
Trend in Estimate Revisions
The Zacks Consensus Estimate for third-quarter earnings per share has moved 18 cents north in the past seven days. The metric indicates a significant year-over-year improvement of 41%. Further, the Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 68.1%.
Things to Note
Courtesy of economic recovery from the pandemic lows and preference for personal mobility, demand for vehicles has been on the rise, which is likely to have aided sales of Lithia. Encouragingly, the auto retailer is expected to post a year-over-year increase in third-quarter revenues across all its units. We expect Lithia’s Driveway e-commerce program to have significantly buoyed the firm’s Q3 revenues. In particular, higher average selling price for new and used cars is likely to have aided revenues.
The Zacks Consensus Estimate for revenues in the used vehicle business is $2,124 million, indicating an increase from $1,192 million recorded in the year-ago period. The consensus mark for revenues from the new vehicle segment stands at $3,008 million, suggesting 59.7% year-over-year growth. The Zacks Consensus Estimate for revenues from Finance & Insurance and Fleet & Other is pegged at $273 million and $42.65 million, respectively, implying an improvement from the corresponding quarter of 2020.
Meanwhile, rising commodity costs, tough labor markets and logistical inefficiencies amid the global chip crunch are likely to have played spoilsports. Consequently, gross profit is anticipated to have declined from the year-ago period. The consensus mark for gross margins in the used vehicle retail segment is pegged at 12.7%, pointing to a decline from 13.2% in third-quarter 2020.
Our proven model does not conclusively predict an earnings beat for Lithia this time around. 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, which is 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: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -1.28%. This is because the Most Accurate Estimate for earnings per share is pegged 12 cents lower than the Zacks Consensus Estimate.
Zacks Rank: Lithia currently flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
Here are some companies from the auto space, which according to our model have the right combination of elements to come up with an earnings beat this time around.
Tesla TSLA has an Earnings ESP of +15.68% and a Zacks Rank #1. The stock is set to report third-quarter 2021 earnings on Oct 20.
AutoNation AN has an Earnings ESP of +2.45% and a Zacks Rank #1. The stock is set to report third-quarter 2021 earnings on Oct 21.
Group 1 Automotive GPI has an Earnings ESP of +2.78% and a Zacks Rank #2. The stock is set to report third-quarter 2021 earnings on Oct 28.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AutoNation, Inc. (AN): Free Stock Analysis Report
Group 1 Automotive, Inc. (GPI): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Lithia Motors, Inc. (LAD): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research