LAD Lithia Motors Inc

The major stock indices were all in the green on Tuesday with cyclical stocks leading the way. There were dozens of Zacks #1 Rank (Strong Buy) stocks showing strong gains on the day too.

Lithia Motors (LAD) jumped an impressive 9.9%, for instance. Volume was heavier than normal, but there was no specific news driving shares higher.

Lithia Motors is the 9th largest automotive retailer in the U.S. It sells 27 different brands of new and all brands of used vehicles at 86 locations in 12 states.

The company has strung together an impressive string of 6 positive earnings surprises as the automotive industry rebounds from the doldrums of the Great Recession. For the second quarter of 2011, Lithia reported a remarkable 24% increase in new vehicle same-store sales and a 16% increase in used vehicle same-store sales.

Earnings per share came in at 55 cents, crushing the Zacks Consensus Estimate of 35 cents. Management gave bullish guidance for the remainder of the year too, prompting analysts to raise their estimates significantly higher, sending the stock to a Zacks #1 Rank (Strong Buy).

The valuation picture looks very attractive with shares trading at just 9.0x 2011 earnings, a significant discount to the industry average of 14.0x.

Silicon Motion Technology Corp. (SIMO) was also hot, surging 9.1% on the day.

Silicon Motion Technology Corp. is a fabless semiconductor company that designs, develops and markets high performance, low-power semiconductor solutions for the multimedia consumer electronics market. It was founded in 1995 and is headquartered in Jhubei City, Taiwan.

Earnings estimates have risen substantially over the last few weeks after the company issued bullish guidance in its second quarter press release. For the full year 2011, the company expects 40% to 50% revenue growth due to the increasing demand for cards bundled with smartphones.

Shares trade around 13.5x 12-month forward earnings, a slight discount to its historical median of 14.7x. Its price to book ratio of 2.1 is in-line with its historical median.

Other notable top performing Zacks #1 Rank stocks from Tuesday include: CVR Partners, LP (UAN), which was up 6.5%, CNH Global (CNH), which rose 6.4%, and W.R. Grace & Co. (GRA), which gained 6.0%.

To see the full list of Zacks #1 Rank (Strong Buy) stocks click here.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research.

 
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