Results: Lithia Motors, Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts

Lithia Motors, Inc. (NYSE:LAD) shareholders are probably feeling a little disappointed, since its shares fell 2.8% to US$282 in the week after its latest second-quarter results. Revenues were US$9.2b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$7.87 were also better than expected, beating analyst predictions by 12%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Lithia Motors

Taking into account the latest results, the current consensus from Lithia Motors' eleven analysts is for revenues of US$36.5b in 2024. This would reflect a solid 8.2% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to decline 12% to US$28.15 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$36.6b and earnings per share (EPS) of US$28.33 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

The analysts reconfirmed their price target of US$337, showing that the business is executing well and in line with expectations. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Lithia Motors analyst has a price target of US$424 per share, while the most pessimistic values it at US$225. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Lithia Motors shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Lithia Motors' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 17% growth on an annualised basis. This is compared to a historical growth rate of 23% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.8% annually. So it's pretty clear that, while Lithia Motors' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Lithia Motors going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Lithia Motors (1 can't be ignored!) that we have uncovered.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.