Lithia Posts Record Revenue as Earnings Rebound
Adjusted earnings rose 9% to $10.03 a share as cost controls and a smaller share count lifted results.
Lithia Motors (LAD), the automotive retailer, posted record second-quarter revenue and restored earnings growth after a sharp decline in the first three months of the year.
The quarter marked an inflection from the start of 2024. Revenue growth accelerated to 2.2% from 1% in the prior quarter, while adjusted earnings reversed a 7% decline. The sales pace remained below the 4% growth recorded a year earlier.
Revenue reached $9.79 billion, up from $9.3 billion in the first quarter, while diluted earnings rose 16.9% to $11.54 a share from $9.87 a year earlier and $4.28 in the prior quarter. Net income increased 1.3% to $261.6 million, with much of the faster per-share growth coming from a 13.1% reduction in diluted shares outstanding.
Aftersales provided the strongest operating support. Revenue from the business rose 3.9% to $1.07 billion as its cost of sales edged down, lifting gross profit to $633.0 million from $592.6 million. Same-store aftersales gross profit increased 3.1%, slower than the first quarter's 5.7% gain, while gross margin expanded another 120 basis points to 59.2%.
Vehicle sales produced a more mixed result. New-vehicle revenue rose 2.7% to $4.83 billion, but faster cost growth reduced new-vehicle gross profit to $284.0 million from $313.4 million. Used-vehicle revenue increased 1.4%, and gross profit was roughly flat, though used-retail gross profit per unit improved $339 sequentially. Finance-and-insurance revenue declined 2.0% to $366.4 million.
Financing Operations income climbed 81.6% to a record $36.5 million as average managed receivables increased 22.9% to $5.27 billion. Originations reached a record $884 million, while lower funding costs helped widen the total interest margin to 4.8% despite a decline in loan yields.
Lithia held selling, general and administrative expense unchanged at $1.01 billion, helping operating income rise 5.4% even as gross profit increased 0.8%. Adjusted SG&A fell to 68.6% of gross profit, improving 290 basis points sequentially. Floor-plan interest expense, however, increased 26.7% to $69.7 million.
The company repurchased $242 million of shares during the quarter and raised its dividend 23% to $0.70 a share. It also added $500 million to its repurchase authorization, leaving about $620 million available, even as first-half operating cash flow swung to a $174.1 million use amid a larger inventory build and rising finance receivables.