Li Auto Q2 Earnings Fall Y/Y Due to Higher Costs & Pricing Pressures

Li Auto Inc. LI reported second-quarter 2024 adjusted earnings per ADS of 20 cents, down from 36 cents reported in the year-ago quarter. Rising costs and price reductions due to higher competition amid falling EV demand resulted in a year-over-year decline. The China-based EV maker generated total revenues of $4.36 billion, up from $3.95 billion reported in the year-ago quarter on higher year-over-year vehicle deliveries. It sold 108,581 units, up from 86,533 in the second quarter of 2023.

The company reported gross profit of $850 million, down from $859.9 million in the year-ago quarter. The gross margin fell to 19.5% compared with 21.8% in the second quarter of 2023 due to a dip in vehicle margin. Research and development expenses rose to $416.6 million from $334.5 million in the second quarter of 2023 due to higher expenses to support the expanding range of products and technologies as well as increased employee compensation resulting from a larger workforce. Selling, general and administrative expenses increased to $387.4 million from $318.5 million in the year-ago period due to increased employee compensation and higher rental and other expenses on sales and servicing network expansion.

As of June 30, 2024, Li Auto had cash and cash equivalents of $11.12 billion, up from $8.38 billion as of June 30, 2023. It had a long-term debt of $1.1 billion compared with $199.9 million as of June 30, 2023.

In the second quarter of 2024, net cash used in operating activities was $59.1 million compared with net cash provided by operating activities of $1.53 billion in the second quarter of 2023. In the second quarter of 2024, Li Auto reported a negative free cash flow of $254.9 million compared with a positive free cash flow of $1.33 billion reported in the second quarter of 2023.

Li Auto's second-quarter results were also adversely affected by the costs associated with ramping up production of the new Li L6 five-seat family SUV. However, the company anticipates improvements in margins and cash flow in the second half of the year as Li L6 production stabilizes and measures to reduce costs and enhance efficiency are fully implemented. For the third quarter of 2024, Li Auto expects total vehicle deliveries in the range of 145,000-155,000, suggesting a rise of 38-47.5% from the third quarter of 2023. It expects total revenues in the range of $5.4-$5.8 billion, indicating a rise of 13.6-22.1% from the year-ago quarter.

Zacks Rank & Key Picks

LI currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto space are Dorman Products, Inc. DORM, Blue Bird Corporation BLBD and Douglas Dynamics, Inc. PLOW, each sporting a Zacks Rank #1 (Strong Buy) at present.

The consensus estimate for DORM's 2024 sales and earnings suggests year-over-year growth of 3.71% and 35.46%, respectively. EPS estimates for 2024 and 2025 have improved 51 cents and 37 cents, respectively, in the past 30 days.

The Zacks Consensus Estimate for BLBD's 2024 sales and earnings suggests year-over-year growth of 17.58% and 215.89%, respectively. EPS estimates for 2024 and 2025 have improved 65 cents and 80 cents, respectively, in the past 30 days.

The Zacks Consensus Estimate for PLOW's 2024 earnings suggests year-over-year growth of 60.4%. EPS estimates for 2024 have improved 15 cents in the past 30 days.

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