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Lithia Motors and DMC Global highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – August 4, 2021 – Zacks Equity Research Shares of Lithia Motors, Inc. (LAD - Free Report) as the Bull of the Day, DMC Global Inc. (BOOM - Free Report) as the Bear of the Day.
Lithia Motors blew out earnings in the second quarter as auto sales continue to be red hot. This Zacks Rank #1 (Strong Buy) is expected to grow earnings 63% this year.
Lithia Motors, now known as Lithia & Driveway, or LAD, is one of the country's largest auto retailers. It sells new and used cars but also operates an e-commerce site called Driveway, which allows customers to buy or sell a car online.
Massive Beat in the Second Quarter
On July 21, Lithia reported its second quarter results and blew by the Zacks Consensus by $4.56, or 69.5%. Earnings were $11.12 versus the Consensus of $6.56.
It was the 6th earnings beat in a row.
Revenue rose 118% to $6 billion from $2.8 billion last year. But remember, the second quarter was the big pandemic quarter when there were restrictions on retail stores.
New vehicle retail sales were up 130% while used vehicle retail sales jumped 95.7%.
F&I per unit rose 16.4% to $1,854
Service, body and parts revenue also rose 89.1%.
Total vehicle gross profit per unit increased 41.3% to $5,723.
Driveway, the e-commerce site which lets you shop by monthly payment, saw 500 transactions in June, a new milestone, and is on track to meet the company's goal of 15,000 transactions this year.
But even comparing with 2019, which was pre-pandemic, the quarter shined. Same store revenue growth still jumped 20% for new vehicles, 49% for used vehicles, 39% for F&I and 3% for service, body and parts.
Analysts Bullish About 2021
Not surprisingly, given the big beat in the quarter, the analysts rushed to raise full year estimates.
The 2021 Zacks Consensus Estimate rose to $29.73 from $23.57 as 4 estimates were revised higher, and none were cut.
That's earnings growth of 63.4% as the company made $18.19 in 2020.
What about 2022?
Analysts appear to be cautious about growth for next year.
While 4 estimates were revised higher after the earnings report for 2022, the Zacks Consensus is at $29.81, up just 0.3% from 2021.
Shares Soar But Are Still Cheap
Lithia has been a winning stock the last 2 years as shares have soared 181.6% in that time.
But they're still cheap, with a forward P/E of just 12.6.
And with that massive 2021 earnings growth, and low P/E, the company has an attractive PEG ratio of just 0.6.
A PEG ratio under 1.0 usually indicates a company has both growth and value, a rare combination.
Lithia is also shareholder friendly, paying a dividend that yields 0.4%.
It's not the only red-hot auto retailer. Competitors Group 1 Automotive, Sonic Automotive and Penske Automotive Group, are all Zacks Rank #1 (Strong Buy) stocks.
But Lithia has its unique Driveway business.
For investors looking for a way to play the hot auto market, Lithia is one to keep on the short list.
DMC Global is benefiting from the recovery in the energy industry. However, this Zacks Rank #5 (Strong Sell) saw its earnings estimates cut after its Q2 earnings report.
DMC Global is a holding company that currently operates two business segments: DynaEnergetics and NobelClad. They address the energy, industrial processing and transportation markets.
It's goal is to support businesses with long-term capital and strategic, legal, technology and operating resources.
A Miss in the Second Quarter
On July 22, DMC Global reported its second quarter results and missed on the Zacks Consensus by $0.04. Earnings were $0.10 compared to the consensus of $0.14.
Sales were up 51% to $65.4 million year-over-year but also grew 18% sequentially versus the first quarter.
The company said the sales growth was due to the "accelerating recovery of the energy industry" which drove improved demand for DynaEnergetics' well perforating systems.
It also saw increased order shipments at Nobelclad.
DynaEnergetics sales were up 79% to $42.3 million year-over-year and jumped 11% sequentially from the first quarter.
NobelClad sales jumped 18% to $23.2 million versus last year but were up 33% sequentially from the first quarter.
Third Quarter Guidance Disappoints
DMC Global expects North America's onshore unconventional oil and gas market will continue to improve in the third quarter but at a more moderate pace than what was happening in the first half of the year.
Additionally, the growth is expected to be partially offset by lower sales in the Middle East.
NobelClad's sales are only expected to grow to the range of $24 to $25 million, up from $23.2 million in the second quarter.
As a result, the analysts have been adjusting their earnings estimates. They were too bullish and have had to cut.
2 estimates were cut for 2021 in the last month pushing down the Zacks Consensus Estimate to $0.56 from $0.76 in the last month.
That's still earnings growth of 700% as it only made $0.07 in 2020.
The 2022 Zacks Consensus also saw cuts, pushing it down to $1.57 from $1.95 in the last 30 days. But that's another 179% earnings growth.
Shares Fall: Is it a Buying Opportunity?
Shares of DMC Global rallied big as energy prices soared. Over the last year they were up 48%.
But they've fallen 19.3% over the last 3 months and are now up just 0.8% year-to-date.
Are they a deal?
DMC Global has a forward P/E of 76.8, so on a P/E basis the shares are still expensive even with the big earnings growth expected for 2022.
Investors might want to keep it on a watch list and see if the shares go on sale even further.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Lithia Motors and DMC Global highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 4, 2021 – Zacks Equity Research Shares of Lithia Motors, Inc. (LAD - Free Report) as the Bull of the Day, DMC Global Inc. (BOOM - Free Report) as the Bear of the Day.
Here is a synopsis of all two stocks:
Bull of the Day:
Lithia Motors blew out earnings in the second quarter as auto sales continue to be red hot. This Zacks Rank #1 (Strong Buy) is expected to grow earnings 63% this year.
Lithia Motors, now known as Lithia & Driveway, or LAD, is one of the country's largest auto retailers. It sells new and used cars but also operates an e-commerce site called Driveway, which allows customers to buy or sell a car online.
Massive Beat in the Second Quarter
On July 21, Lithia reported its second quarter results and blew by the Zacks Consensus by $4.56, or 69.5%. Earnings were $11.12 versus the Consensus of $6.56.
It was the 6th earnings beat in a row.
Revenue rose 118% to $6 billion from $2.8 billion last year. But remember, the second quarter was the big pandemic quarter when there were restrictions on retail stores.
New vehicle retail sales were up 130% while used vehicle retail sales jumped 95.7%.
F&I per unit rose 16.4% to $1,854
Service, body and parts revenue also rose 89.1%.
Total vehicle gross profit per unit increased 41.3% to $5,723.
Driveway, the e-commerce site which lets you shop by monthly payment, saw 500 transactions in June, a new milestone, and is on track to meet the company's goal of 15,000 transactions this year.
But even comparing with 2019, which was pre-pandemic, the quarter shined. Same store revenue growth still jumped 20% for new vehicles, 49% for used vehicles, 39% for F&I and 3% for service, body and parts.
Analysts Bullish About 2021
Not surprisingly, given the big beat in the quarter, the analysts rushed to raise full year estimates.
The 2021 Zacks Consensus Estimate rose to $29.73 from $23.57 as 4 estimates were revised higher, and none were cut.
That's earnings growth of 63.4% as the company made $18.19 in 2020.
What about 2022?
Analysts appear to be cautious about growth for next year.
While 4 estimates were revised higher after the earnings report for 2022, the Zacks Consensus is at $29.81, up just 0.3% from 2021.
Shares Soar But Are Still Cheap
Lithia has been a winning stock the last 2 years as shares have soared 181.6% in that time.
But they're still cheap, with a forward P/E of just 12.6.
And with that massive 2021 earnings growth, and low P/E, the company has an attractive PEG ratio of just 0.6.
A PEG ratio under 1.0 usually indicates a company has both growth and value, a rare combination.
Lithia is also shareholder friendly, paying a dividend that yields 0.4%.
It's not the only red-hot auto retailer. Competitors Group 1 Automotive, Sonic Automotive and Penske Automotive Group, are all Zacks Rank #1 (Strong Buy) stocks.
But Lithia has its unique Driveway business.
For investors looking for a way to play the hot auto market, Lithia is one to keep on the short list.
Bear of the Day:
DMC Global is benefiting from the recovery in the energy industry. However, this Zacks Rank #5 (Strong Sell) saw its earnings estimates cut after its Q2 earnings report.
DMC Global is a holding company that currently operates two business segments: DynaEnergetics and NobelClad. They address the energy, industrial processing and transportation markets.
It's goal is to support businesses with long-term capital and strategic, legal, technology and operating resources.
A Miss in the Second Quarter
On July 22, DMC Global reported its second quarter results and missed on the Zacks Consensus by $0.04. Earnings were $0.10 compared to the consensus of $0.14.
Sales were up 51% to $65.4 million year-over-year but also grew 18% sequentially versus the first quarter.
The company said the sales growth was due to the "accelerating recovery of the energy industry" which drove improved demand for DynaEnergetics' well perforating systems.
It also saw increased order shipments at Nobelclad.
DynaEnergetics sales were up 79% to $42.3 million year-over-year and jumped 11% sequentially from the first quarter.
NobelClad sales jumped 18% to $23.2 million versus last year but were up 33% sequentially from the first quarter.
Third Quarter Guidance Disappoints
DMC Global expects North America's onshore unconventional oil and gas market will continue to improve in the third quarter but at a more moderate pace than what was happening in the first half of the year.
Additionally, the growth is expected to be partially offset by lower sales in the Middle East.
NobelClad's sales are only expected to grow to the range of $24 to $25 million, up from $23.2 million in the second quarter.
As a result, the analysts have been adjusting their earnings estimates. They were too bullish and have had to cut.
2 estimates were cut for 2021 in the last month pushing down the Zacks Consensus Estimate to $0.56 from $0.76 in the last month.
That's still earnings growth of 700% as it only made $0.07 in 2020.
The 2022 Zacks Consensus also saw cuts, pushing it down to $1.57 from $1.95 in the last 30 days. But that's another 179% earnings growth.
Shares Fall: Is it a Buying Opportunity?
Shares of DMC Global rallied big as energy prices soared. Over the last year they were up 48%.
But they've fallen 19.3% over the last 3 months and are now up just 0.8% year-to-date.
Are they a deal?
DMC Global has a forward P/E of 76.8, so on a P/E basis the shares are still expensive even with the big earnings growth expected for 2022.
Investors might want to keep it on a watch list and see if the shares go on sale even further.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.