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1. Company Snapshot

1.a. Company Description

Lithia 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.

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1.b. Last Insights on LAD

Lithia Motors' recent performance faced negative drivers, including weak vehicle demand and high debt levels. The company's significant leverage from acquisition-driven growth raised concerns about its debt levels versus market capitalization. Despite robust revenue and profit growth, driven by higher vehicle sales and strategic dealership acquisitions, gross profit per unit declined as industry conditions normalized. Additionally, several institutional investors, including Aristides Capital LLC, Campbell & CO Investment Adviser LLC, and Boston Partners, reduced their positions in the company.

1.c. Company Highlights

2. Lithia Motors' Q3 2025 Earnings: A Strong Performance

Lithia Motors, Inc.'s 2025 third-quarter earnings call highlighted the company's execution at speed, with improved same-store revenue across all business lines. Quarterly revenue was $9.7 billion, up 4.9% year over year, and adjusted diluted EPS was $9.50, up 17% from the previous year, beating analyst estimates of $8.53. The company's same-store revenues increased 7.7%, driven by growth in every business line, with used vehicle performance continuing to improve, up 11.8% over last year.

Publication Date: Oct -23

📋 Highlights
  • Revenue & EPS Growth: Quarterly revenue surged to $9.7B (+4.9% YoY), with adjusted diluted EPS reaching $9.50 (+17% YoY).
  • Same-Store Revenues: Rose 7.7%, driven by 11.8% growth in used vehicles and 5.5% in new retail units.
  • Aftersales Performance: Gross profit climbed 9.1% with margins expanding to 58.4%, alongside 3.9% revenue increase.
  • Acquisition Strategy: Maintains $2B 2025 M&A target, with $1B in potential deals and a focus on Southeast/South Central expansion.
  • UK Margin Challenges: SG&A costs rose $20M due to labor policies, but $11M offset via headcount cuts and productivity gains.

Revenue Growth and Margin Expansion

The company's new retail revenue grew 5.5% with units up 2.5%, while F&I revenue increased 5.7%. Aftersales revenue rose 3.9%, with gross profit up 9.1% and margins expanding to 58.4%. This strong performance was driven by the company's focus on used cars, with a goal to grow through affordability and stepping customers up to better or newer cars.

Used Car Business Performance

The used car business performed well, with a 22% unit increase in value autos. This segment is driven by higher credit quality customers and has achieved a 16% margin, with an annual return on investment of 130%. In contrast, certified and core products had margins of around 5.1-5.2%. The value auto segment is considered "bulletproof" and less affected by new vehicle pricing.

Electric Vehicle Strategy

Lithia Motors pushed out around 4,000 first-generation battery electric vehicles (BEVs) in September, which had limited range (around 200 miles). However, next-generation BEVs with ranges of 300-400 miles are expected to arrive by the end of 2025 or early 2026, priced similarly to the current models. The company does not see a significant threat from Chinese brands in the EV segment.

Valuation Metrics

With a P/E Ratio of 6.01 and an EV/EBITDA of 5.91, Lithia Motors' valuation appears reasonable. The company's ROE is 20.04%, indicating strong profitability. Analysts estimate next year's revenue growth at 4.5%, which suggests a stable outlook for the company.

Acquisition Strategy and Outlook

Lithia Motors has a robust acquisition pipeline, with around $1 billion in potential deals that could close by year-end. The company expects to achieve two to three times lift in net profitability, driven by scale synergies, used vehicle sales, and aftersales growth. The company aims to achieve $2 of EPS for every billion dollars of revenue.

3. NewsRoom

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Lithia & Driveway (LAD) Provides Share Repurchase Update and Continues to Expand in Canada

Dec -02

Source: prnewswire.com

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Boston Partners Sells 3,099 Shares of Lithia Motors, Inc. $LAD

Nov -29

Source: defenseworld.net

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Lithia Motors, Inc. $LAD Shares Sold by Aristides Capital LLC

Nov -27

Source: defenseworld.net

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Campbell & CO Investment Adviser LLC Sells 7,766 Shares of Lithia Motors, Inc. $LAD

Nov -18

Source: defenseworld.net

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MD Johnson Inc. Advises Geoff Emery on the Sale of Porsche of Beverly Hills and Santa Monica Audi to Lithia & Driveway (LAD)

Nov -12

Source: prnewswire.com

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Lithia & Driveway (LAD) Continues Strategic Luxury Network Expansion and is Named to TIME America's Growth Leaders List

Nov -11

Source: prnewswire.com

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Lithia Motors: Beware Of Debt And Weak Vehicle Demand

Nov -03

Source: seekingalpha.com

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Lithia Motors: Valuation To Stay Rangebound Due To Poor New Vehicle GPU

Oct -30

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.00%)

6. Segments

Vehicle

Expected Growth: 6.0%

Lithia Motors' 6.0% growth is driven by increasing demand for new and used vehicles, expansion into high-growth markets, and strategic acquisitions. Additionally, the company's focus on digital retailing, improved customer experience, and cost savings initiatives contribute to its growth momentum.

7. Detailed Products

New Vehicle Sales

Lithia Motors, Inc. sells new vehicles from various manufacturers, including Chrysler, Dodge, Jeep, Ram, Fiat, and Alfa Romeo.

Used Vehicle Sales

The company sells used vehicles, including certified pre-owned vehicles, from various manufacturers.

Parts and Service

Lithia Motors, Inc. offers parts and service for vehicles, including maintenance, repairs, and accessories.

Body and Paint Repair

The company provides body and paint repair services for vehicles.

Financing and Insurance

Lithia Motors, Inc. offers financing and insurance options for vehicle purchases.

Vehicle Protection Products

The company offers vehicle protection products, such as extended warranties and maintenance plans.

8. Lithia Motors, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Lithia Motors, Inc. faces moderate threat from substitutes, as customers have limited alternatives to purchasing new vehicles from dealerships. However, the rise of ride-hailing services and car-sharing platforms poses a moderate threat to the company's business.

Bargaining Power Of Customers

Lithia Motors, Inc. has a low bargaining power of customers, as individual customers have limited negotiating power when purchasing vehicles. However, the company's large customer base and diverse product offerings mitigate this risk.

Bargaining Power Of Suppliers

Lithia Motors, Inc. faces moderate bargaining power from suppliers, as the company relies on a few large automotive manufacturers for its inventory. However, the company's scale and diversification of suppliers mitigate this risk.

Threat Of New Entrants

Lithia Motors, Inc. faces a low threat from new entrants, as the automotive retail industry has high barriers to entry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

Lithia Motors, Inc. operates in a highly competitive industry, with intense rivalry among dealerships and online platforms. The company must continually invest in marketing and customer service to maintain its market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 63.20%
Debt Cost 4.39%
Equity Weight 36.80%
Equity Cost 11.88%
WACC 7.15%
Leverage 171.75%

11. Quality Control: Lithia Motors, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Value: 6.9

Growth: 7.1

Quality: 4.8

Yield: 5.0

Momentum: 7.0

Volatility: 8.0

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Growth: 7.8

Quality: 3.5

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A-Score: 5.3/10

Value: 6.7

Growth: 6.7

Quality: 5.2

Yield: 1.0

Momentum: 6.0

Volatility: 6.0

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A-Score: 3.4/10

Value: 6.5

Growth: 5.4

Quality: 4.4

Yield: 0.0

Momentum: 0.5

Volatility: 3.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

328.39$

Current Price

328.39$

Potential

-0.00%

Expected Cash-Flows