Core Viewpoint - Lithia Motors (LAD) reported a decline in adjusted earnings per share for Q4 2024, but revenues exceeded expectations due to strong performance in new vehicle retail and used vehicle wholesale segments [1] Financial Performance - Adjusted earnings per share for Q4 2024 were $7.79, down from $8.24 in the prior year but above the Zacks Consensus Estimate of $7.01 [1] - Total revenues reached $9.22 billion, a 20% increase year over year, surpassing the Zacks Consensus Estimate of $8.82 billion [1] Segmental Performance - New vehicle retail revenues increased by 18.4% year over year to $4.7 billion, exceeding the estimate of $4.25 billion, driven by a 20.1% rise in units sold to 96,760 [2] - Used vehicle retail revenues rose 16.4% year over year to $2.63 billion but fell short of the estimate of $2.69 billion due to lower-than-expected units sold [3] - Revenues from used vehicle wholesale increased by 40.3% to $340.9 million, exceeding the estimate of $301.8 million [4] - Finance and insurance revenues rose 7.3% to $355.8 million but missed the estimate of $387.9 million [4] Cost and Expenses - Cost of sales increased by 22.4% year over year in Q4 2024 [6] - SG&A expenses were $902.1 million, up 7.8% from $836.8 million in the prior year, representing 66.3% of gross profit [6] Shareholder Returns - The company declared a quarterly dividend of 53 cents, payable on March 21, 2025, to shareholders of record as of March 7, 2025 [7] - Lithia repurchased approximately 1,230,000 shares at an average price of $283 in 2024, with $454.3 million remaining under its buyback authorization [7] Cash and Debt Position - Cash, cash equivalents, and restricted cash totaled $402.2 million as of December 31, 2024, down from $941.4 million a year earlier [8] - Long-term debt increased to $6.1 billion as of December 31, 2024, up from $5.5 billion as of December 31, 2023 [8]

Financial Data and Key Metrics Changes - Lithia & Driveway reported record revenues of $9.2 billion for Q4 2024, a 20% increase from the same quarter last year [12] - Adjusted diluted earnings per share (EPS) for the quarter was $7.79, marking a significant improvement in profitability [8] - The company achieved its $200 million annual cost savings target, with two consecutive quarters of sequential decreases in SG&A [13][39] Business Line Data and Key Metrics Changes - New vehicle units increased by 7.4% year-over-year, while used vehicle units decreased by 4.3% [34] - Aftersales revenues grew by 3.4% year-over-year, with a gross profit margin of 55.8% [36] - Total gross vehicle profit (GPU) was $4,535, consistent with the prior quarter but down $444 compared to the same period last year [33] Market Data and Key Metrics Changes - The company is positioned to capitalize on a return to historical SAAR levels, with expectations of reaching 17 million SAAR by year-end [56] - Approximately 36% to 38% of vehicles are estimated to be impacted by tariffs, but the company maintains a strong inventory position [57] Company Strategy and Development Direction - The focus remains on customer loyalty, potential, and growth through disciplined execution and strategic investments [11] - The company aims to achieve $2 of EPS for every $1 billion in revenue, leveraging its integrated mobility ecosystem [11][24] - Acquisitions are a core competency, with a disciplined approach to seek accretive opportunities primarily in the U.S. [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about capturing market opportunities, particularly in used vehicle sales, with potential for double-digit same-store sales growth [58] - The company is focused on improving aftersales performance and believes there is significant growth potential in this area [36][90] - Management acknowledged the challenges in the U.K. market but remains positive about cost management improvements [72] Other Important Information - The Financing Operations segment achieved profitability of $9 million in Q4, compared to a loss of $2 million in the same quarter last year [41] - The company repurchased $93 million or 0.9% of its outstanding shares during the quarter [24] - The company ended the quarter with net leverage of 2.5x, in line with its long-term target of 3x [48] Q&A Session Summary Question: Current market environment and trends - Management noted improved sentiment and a pathway to 17 million SAAR by year-end, with a strong inventory position to handle potential tariffs [56][57] Question: 2025 new vehicle GPU outlook - Management indicated a conservative approach to GPU guidance, expecting $2,500 to $2,700 as the target for the year, with a normalized level around $2,300 to $2,500 [61][63] Question: Used vehicle performance and GPU - Management expressed disappointment in the decline of used vehicle performance but sees potential for improvement in 2025 [68][70] Question: U.K. efficiency and SG&A updates - Management reported improvements in cost management in the U.K., targeting a reduction in SG&A to 75% of gross profit [72][84] Question: SG&A opportunities - Management identified additional cost savings in inventory and personnel, aiming for a total of $320 million in reductions [82][84] Question: Aftersales revenue growth - Management acknowledged the need for improvement in aftersales growth and set a challenge for leaders to reach higher performance levels [89] Question: Acquisition pricing and market conditions - Management highlighted the current high acquisition multiples and the preference to repurchase shares instead of pursuing acquisitions at inflated prices [118][120]

Revenue Performance - Fourth quarter 2024 revenue reached a record $9.2 billion, a 20% increase from $7.7 billion in the fourth quarter of 2023[3]. - Full year 2024 revenue increased 17% to a record $36.2 billion from $31.0 billion in 2023[7]. - Total revenues for Q4 2024 reached $9,222.1 million, a 20.2% increase from $7,674.5 million in Q4 2023[23]. - Total revenues for the three months ended December 31, 2024, increased by 3.1% to $7,854.3 million compared to $7,615.4 million in 2023[25]. Earnings and Profitability - Fourth quarter 2024 diluted earnings per share attributable to Lithia & Driveway was $8.12, a 5% increase from $7.74 per share in the same period of 2023[4]. - The company reported a flat net income of $217 million for the fourth quarter 2024, compared to $216 million in the same period of 2023[5]. - Net income attributable to LAD for Q4 2024 was $216.2 million, a 1.3% increase compared to $213.4 million in Q4 2023[23]. - Net income for the twelve months ended December 31, 2024, was $821.6 million, down from $1,011.7 million in 2023[29]. - The company’s net income attributable to LAD for the twelve months ended December 31, 2024, was $802.0 million, down from $1,000.8 million in 2023, a decline of 20%[32]. Expenses and Margins - SG&A expenses as a percentage of revenue decreased to 9.9% in Q4 2024 from 10.7% in Q4 2023[24]. - Total selling, general and administrative expenses for the twelve months ended December 31, 2024, were $3,755.2 million, an increase from $3,294.8 million in 2023, reflecting a growth of 13.9%[32]. - The gross profit margin for new vehicle retail dropped by 240 basis points to 6.8% for the twelve months ended December 31, 2024[25]. Vehicle Sales - New vehicle retail unit sales increased by 20.1% to 96,760 units in Q4 2024, compared to 80,596 units in Q4 2023[24]. - New vehicle retail revenues increased by 18.4% to $4,705.9 million, while used vehicle retail revenues rose by 16.4% to $2,638.5 million[23]. - New vehicle retail revenues rose by 6.3% to $4,200.5 million, while used vehicle retail revenues decreased by 5.8% to $2,119.0 million for the same period[25]. Financing and Debt - Driveway Finance Corporation originated $501 million in loans, with a portfolio of $3.9 billion in average managed receivables and a net interest margin of 4.7%[9]. - Total debt increased by 21.7% to $13,265.7 million from $10,900.5 million[34]. - Net debt rose by 28.7% to $4,142.2 million compared to $3,219.1 million[34]. - Floor plan notes payable increased by 34.9% to $4,903.1 million from $3,635.5 million[34]. Cash and Liquidity - The company ended the fourth quarter with approximately $1.4 billion in cash and cash equivalents, plus $0.3 billion in unfinanced real estate liquidity[12]. - Cash, restricted cash, and cash equivalents at the end of the period decreased to $445.8 million from $972.0 million in 2023[29]. - Unrestricted cash and cash equivalents decreased by 72.7% to $225.1 million from $825.0 million[34]. Shareholder Returns - The Board of Directors approved a dividend of $0.53 per share for the fourth quarter 2024, payable on March 21, 2025[13]. - Lithia & Driveway repurchased approximately 1,230,000 shares in 2024, representing 4.6% of shares outstanding[17]. Other Financial Metrics - The financing operations achieved their first profitable year with an income of $15.4 million, compared to a loss of $45.9 million in 2023[17]. - Adjusted EBITDA for the three months ended December 31, 2024, was $419.0 million, representing a 5.4% increase from $397.6 million in the same period of 2023[33]. - The average gross profit per unit for new vehicle retail decreased by 26.4% to $3,263 for the twelve months ended December 31, 2024[25].

Core Insights - Lithia Motors (LAD) reported quarterly earnings of $7.79 per share, exceeding the Zacks Consensus Estimate of $7.01 per share, but down from $8.24 per share a year ago, representing an earnings surprise of 11.13% [1] - The company achieved revenues of $9.22 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 4.62% and up from $7.67 billion year-over-year [2] - Lithia Motors has outperformed consensus EPS estimates three times in the last four quarters and has also topped revenue estimates three times during the same period [2] Earnings Outlook - The immediate price movement of Lithia Motors' stock will largely depend on management's commentary during the earnings call and future earnings expectations [3] - The current consensus EPS estimate for the upcoming quarter is $8.05 on revenues of $8.98 billion, while for the current fiscal year, the estimate is $34.65 on revenues of $38.53 billion [7] Industry Context - The Automotive - Retail and Whole Sales industry, to which Lithia Motors belongs, is currently ranked in the top 29% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Core Viewpoint - Lithia Motors (LAD) is anticipated to report a year-over-year decline in earnings despite an increase in revenues for the quarter ended December 2024, with the actual results being crucial for its near-term stock price movement [1][2]. Earnings Expectations - The consensus estimate for Lithia Motors' quarterly earnings is $7.01 per share, reflecting a year-over-year decrease of 14.9%, while revenues are projected to be $8.81 billion, an increase of 14.9% from the previous year [3]. - The earnings report is expected to be released on February 12, and the stock may rise if the actual numbers exceed expectations, whereas a miss could lead to a decline [2]. Estimate Revisions - Over the last 30 days, the consensus EPS estimate has been revised 0.5% higher, indicating a reassessment by analysts regarding the company's earnings prospects [4]. - The Most Accurate Estimate for Lithia Motors is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +2.79%, suggesting a likelihood of beating the consensus EPS estimate [10][11]. Earnings Surprise History - In the last reported quarter, Lithia Motors was expected to post earnings of $7.59 per share but actually delivered $8.21, resulting in a positive surprise of +8.17% [12]. - Over the past four quarters, the company has surpassed consensus EPS estimates three times [13]. Industry Comparison - AutoNation (AN), another player in the automotive retail industry, is expected to report earnings of $4.26 per share for the same quarter, indicating a year-over-year decline of 15.1%, with revenues projected at $6.64 billion, down 1.8% from the previous year [17]. - AutoNation's consensus EPS estimate has been revised 1.5% higher in the last 30 days, resulting in an Earnings ESP of 2.11%, suggesting a likelihood of beating the consensus EPS estimate [18].

Acquisition and Expansion - Lithia & Driveway (LAD) has acquired Stohlman Subaru in Sterling, Virginia, enhancing its presence in the Mid-Atlantic region [1] - The acquisition is expected to add $80 million in annualized revenue and was financed using existing on-balance sheet capacity [2] Capital Allocation Update - Since the end of Q3, LAD has repurchased $107 million worth of shares at an average price of $372 [3] - Approximately $454 million remains available under the current share repurchase authorization [3] Company Overview - Lithia & Driveway (LAD) is one of the largest global automotive retailers, offering a wide range of products and services throughout the vehicle ownership lifecycle [4] - The company provides convenient and hassle-free experiences through a comprehensive network of physical locations, ecommerce platforms, captive finance solutions, and other synergistic adjacencies [4] - LAD aims to modernize personal transportation solutions, delivering consistent, low-risk, and profitable growth in a massive and unconsolidated industry [4]

Core Viewpoint - Lithia Motors (LAD) is well-positioned to continue its earnings-beat streak in the upcoming report, having surpassed earnings estimates consistently in recent quarters [1][3]. Earnings Performance - For the last reported quarter, Lithia Motors achieved earnings of $8.21 per share, exceeding the Zacks Consensus Estimate of $7.59 per share by 8.17% [2]. - In the previous quarter, the company reported earnings of $7.87 per share against an expected $7.09 per share, resulting in a surprise of 11% [2]. Earnings Estimates - There has been a favorable change in earnings estimates for Lithia Motors, with a positive Earnings ESP (Expected Surprise Prediction) indicating strong potential for an earnings beat [3][6]. - The current Earnings ESP for Lithia Motors is +1.83%, suggesting that analysts have recently become more optimistic about the company's earnings prospects [6]. Predictive Metrics - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [4]. - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [5].

Core Insights - Lithia & Driveway (NYSE: LAD) will release its fourth quarter 2024 earnings on February 12, 2025, before the market opens [1] - A conference call to discuss the earnings results is scheduled for the same day at 10:00 a.m. Eastern Time [1] Company Overview - Lithia & Driveway is one of the largest global automotive retailers, offering a wide array of products and services throughout the vehicle ownership lifecycle [3] - The company provides convenient and hassle-free experiences through a comprehensive network of physical locations, ecommerce platforms, and captive finance solutions [3] - Lithia & Driveway aims to deliver consistent, low-risk, and profitable growth in a massive and unconsolidated industry [3] - The company's diversified and competitively differentiated design allows for flexibility and scale in modernizing personal transportation solutions [3]

Core Viewpoint - The Zacks Auto Retail and Wholesale industry is facing challenges due to declining profit per unit and high vehicle financing costs, but companies like Lithia Motors, Group 1 Automotive, and Asbury Automotive are expanding their digital and physical presence to adapt to these conditions [1]. Industry Overview - The automotive sector's performance is heavily reliant on retail and wholesale networks, which include dealerships and retail chains that sell new and used vehicles, light trucks, auto parts, and provide repair and maintenance services [2]. Economic Factors - As a consumer cyclical industry, the automotive sector's success is closely linked to economic conditions. High disposable income encourages spending on big-ticket items, while tighter budgets lead to reduced discretionary spending [3]. - The COVID-19 pandemic has accelerated the industry's shift towards e-commerce, which is expected to continue [3]. Sales Trends - Internal combustion engine (ICE) vehicle sales are projected to decline, reaching a record low of 75% of total sales volume in 2025, while electric and hybrid vehicle sales are expected to rise [3]. - Dealers with ICE inventories may need to lower prices to prevent inventory build-up, potentially impacting their profit margins [3]. Financing Environment - High-interest rates are causing customers to delay vehicle purchases, as the cost of vehicle financing remains elevated despite recent interest rate cuts by the Federal Reserve [4][5]. - The Fed's interest rate is currently in the range of 4.25-4.5%, significantly higher than the pre-pandemic level of around 2% [5]. Market Presence and Strategy - Auto dealers are expanding their market presence through strategic acquisitions, which enhance their market share and portfolio [6]. - A strong digital presence is also helping these companies reach a broader customer base, thereby improving profitability [6]. Industry Performance - The Zacks Auto Retail & Wholesale industry ranks 177, placing it in the bottom 29% of approximately 250 Zacks industries, indicating weak near-term prospects [7][8]. - The industry's earnings estimates for 2025 have declined by 30.80% over the past year, reflecting a negative outlook [9]. Stock Market Performance - The Zacks Auto Retail & Wholesale industry has underperformed compared to the S&P 500 and the broader Auto, Tires, and Truck sector, with a return of 8.7% over the past year, while the sector and S&P 500 grew by 26.2% and 26.9%, respectively [11]. Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 8.39X, compared to the S&P 500's 18.67X and the sector's 22X [12]. Company Highlights - **Lithia Motors, Inc. (LAD)**: A leading automotive retailer with a diversified product mix and multiple income streams, benefiting from its Driveway e-commerce platform and strategic acquisitions. The Zacks Consensus Estimate for 2025 sales and EPS implies year-over-year growth of 8.08% and 17.74%, respectively [13][14]. - **Group 1 Automotive, Inc. (GPI)**: A major automotive retailer with a diversified portfolio, focusing on dealership acquisitions to enhance growth. The Zacks Consensus Estimate for 2025 sales and EPS implies year-over-year growth of 11.33% and 5.27%, respectively [15][16]. - **Asbury Automotive Group, Inc. (ABG)**: One of the largest automotive retailers, leveraging its Clicklane e-commerce platform for online transactions. The Zacks Consensus Estimate for 2025 sales and EPS implies year-over-year growth of 2.70% and 7.23%, respectively [17][18].

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