Lithia Q1 Earnings Miss Estimates, Sales Rise Y/Y, Dividend Hiked

Core Insights - Lithia Motors (LAD) reported first-quarter 2025 adjusted earnings per share of $7.66, an increase from $6.11 in the prior-year quarter, but below the Zacks Consensus Estimate of $7.77 [1] - The company's revenues reached $9.18 billion, reflecting a year-over-year increase of 7.3%, yet falling short of the Zacks Consensus Estimate of $9.33 billion [1] Segmental Performance - New vehicle retail revenues rose 9.1% year over year to $4.38 billion, aligning with estimates, while new vehicle units sold increased 7.4% to 91,990 units, missing the estimate of 93,776 units [2] - The average selling price (ASP) of new vehicles increased to $47,616 from $46,848, with a gross margin contraction of 110 basis points to 6.3% due to a 10.3% rise in cost of sales to $4.1 billion [2] - Used vehicle retail revenues grew 4.2% year over year to $2.92 billion, surpassing the estimate of $2.76 billion, with units sold rising 4.8% to 107,326 units, exceeding the expectation of 102,615 units [3] - The ASP for used vehicles was $27,198, down 0.5% year over year, while the gross margin remained flat at 6.5% [3] - Revenues from used vehicle wholesale decreased 2% to $331 million, missing the estimate of $531.9 million, while finance and insurance revenues increased 7% to $364.3 million, exceeding the estimate of $348 million [4] - Aftersales revenues were $979.1 million, up 7.3% year over year, surpassing the estimate of $978.7 million, and fleet and others revenues jumped 31.3% to $204.6 million, beating the expectation of $180.9 million [4] Financial Overview - Same-store new vehicle revenues increased 5.7% year over year, while same-store used vehicle retail sales fell 0.9% [5] - Cost of sales rose 7.5% year over year, with SG&A expenses at $952.7 million, and adjusted SG&A as a percentage of gross profit decreased to 68.2% from 69.4% in the prior year [5] - The company increased its quarterly dividend by 4% to 55 cents, with a share repurchase of nearly 403,000 shares at an average price of $326 [6] - As of March 31, 2025, Lithia had cash and equivalents of $430.3 million, up from $402.2 million at the end of 2024, and long-term debt decreased to $5.9 billion from $6.1 billion [7] Market Position - Lithia currently holds a Zacks Rank 3 (Hold), with better-ranked stocks in the auto sector including Standard Motor Products, Inc. (SMP) with a Zacks Rank 1 (Strong Buy), and Advance Auto Parts, Inc. (AAP) and Carvana Co. (CVNA) both at Zacks Rank 2 (Buy) [8]