The first-quarter results for Lithia Motors, Inc. (NYSE:LAD) were released last week, making it a good time to revisit its performance. Statutory earnings per share fell badly short of expectations, coming in at US$5.89, some 26% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$8.6b. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Lithia Motors after the latest results.
Following the latest results, Lithia Motors' 14 analysts are now forecasting revenues of US$36.6b in 2024. This would be a solid 12% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to descend 14% to US$29.32 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$36.6b and earnings per share (EPS) of US$35.39 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
The consensus price target held steady at US$334, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Lithia Motors analyst has a price target of US$445 per share, while the most pessimistic values it at US$230. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Lithia Motors' past performance and to peers in the same 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 24% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.9% per year. Even after the forecast slowdown in growth, it seems obvious that Lithia Motors is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$334, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Lithia Motors going out to 2026, and you can see them free on our platform here..
It is also worth noting that we have found 1 warning sign for Lithia Motors that you need to take into consideration.
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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.