On Thursday, Stephens, a financial services firm, increased its price target for Lithia Motors (NYSE:LAD) to $405 from the previous $360 while retaining an Overweight rating on the stock. This adjustment comes after Lithia Motors reported its third-quarter earnings for 2024 before the market opened on Wednesday, October 23, 2024.
The company's adjusted EBITDA for the third quarter was $432.6 million with an adjusted earnings per share (EPS) of $8.21. These figures surpassed the estimates set by Stephens, which projected an adjusted EBITDA of $434.9 million and an adjusted EPS of $7.82, and also outperformed the consensus Street estimates of $406.7 million for adjusted EBITDA and $7.62 for adjusted EPS.
Following the earnings announcement, Lithia Motors' shares saw a significant increase, rising 10.1% on the day of the report. The strong performance of the company's stock is attributed to the favorable third-quarter results.
The rationale behind the raised price target is based on slightly increased estimates, an extended forecast period by one quarter, and a modestly higher enterprise value to EBITDA (EV/EBITDA) multiple. The analyst noted that the EV/EBITDA multiple used for Lithia Motors has been adjusted from 7.8 times to 8.0 times.
Stephens maintains a positive outlook on Lithia Motors, as evidenced by the Overweight rating and the increased price target, reflecting confidence in the company's financial performance and future prospects.
In other recent news, Lithia Motors reported a record Q3 revenue of $9.2 billion, marking an 11% year-over-year increase. The company's adjusted diluted earnings per share stood at $8.21. The company also celebrated significant cost savings, achieving $200 million in annualized savings and reducing adjusted SG&A to 66% of gross profit.
Lithia Motors has expanded its portfolio with new acquisitions, including three stores from Duval Motor Company, which are expected to contribute nearly $6 billion in annual revenues. Despite challenges in the subprime segment, the company's prime portfolio showed resilience with slight increases in delinquencies but well-managed provisions.
These are among the recent developments in the company.
InvestingPro Insights
Lithia Motors' strong financial performance, as highlighted in the article, is further supported by real-time data from InvestingPro. The company's market capitalization stands at $8.97 billion, with a P/E ratio of 10.4, indicating that the stock may be undervalued relative to its earnings. This aligns with the positive outlook expressed by Stephens analysts.
InvestingPro Tips reveal that Lithia Motors has raised its dividend for 11 consecutive years and maintained dividend payments for 15 consecutive years, demonstrating a commitment to shareholder returns. This consistent dividend growth, coupled with a current dividend yield of 0.63%, may appeal to income-focused investors.
The company's recent performance is particularly noteworthy, with InvestingPro data showing a 34.7% price total return over the last three months and a 35.55% return over the past six months. These figures corroborate the 10.1% stock price increase mentioned in the article following the earnings announcement.
Lithia Motors' revenue growth of 14.43% over the last twelve months and 11.41% in the most recent quarter underscores the company's expanding business operations. However, investors should note that the company operates with a significant debt burden, which could impact future financial flexibility.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Lithia Motors, providing a deeper understanding of the company's financial health and market position.
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