Lithia Motors expects up to $35 million in 3Q unadjusted net income

Article by Christian Andrei, on October 15, 2014

Lithia Motors Inc. is expecting to post a surge in unadjusted net income in the third quarter of 2014, helped by better new-vehicle sales, service and parts business and F&I revenue. According to the company, its third-quarter unadjusted net income would be between $34 million and $35 million, compared to $31 million in the same period in 2013.

The preliminary results does not include costs tied to Lithia’s recent acquisition of DCH Auto Group Inc. Lithia disclosed that revenue from continuing operations jumped 21 percent to $1.3 billion from $1.1 billion a year earlier.

The company, however, disclosed that its operating income for the quarter was mitigated partly because of shrinking used-car profit margins due to a drop in used-car values. Analysts at RBC Capital Markets remarked that Lithia’s results indicates a shift in the used-vehicle pricing market that may add “some incremental pressure” to the used-vehicle gross profit performance across the auto industry.

Lithia chief executive CEO Bryan DeBoer said in a statement that the company’s top-line revenue, new vehicle sales, service and parts, and F&I per unit exceeded expectations. He noted that used vehicle margins were around 130 basis points lower than anticipated, no thanks to declining used vehicle values.

DeBoer remarked that used-car same-store sales jumped 13 percent. On a continuing operations basis, Lithia is expecting a full-year revenue of between $5.2 billion and $5.4 billion, with new-vehicle sales and used-car sales jumping 35 and 32 percent, respectively.

The company also expects a jump in service body and parts sales to about 34 percent. Lithia expects 2014 F&I gross profit of $1,170 per unit. [source: automotive news - sub. required]

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