Calling the integration of DCH Auto “ahead of expectations,” Lithia Motors modified its earnings guidance and hinted at where the dealer group might expand next because of the successes of bringing those other 27 stores into its portfolio.

Lithia chief executive officer Bryan DeBoer acknowledged that the company originally expected to realize synergies from the DCH acquisition during a two-year transition phase. During the company’s recent conference call to highlight its second-quarter financial and sales report, DeBoer touched on how much quicker that deal enhanced Lithia’s performance.

“The ability of DCH's team to drive change has allowed us to accelerate the process of realizing these savings and is now mostly complete,” DeBoer said. “Despite the realized corporate synergies, many opportunities remain for continued organic growth.

“Clear and transparent performance expectations allows our leadership to continue to drive results towards industry leading benchmarks,” he continued. “The performance of Lithia and DCH stores have allowed us to increase our guidance.”

Lithia now is projecting that its third-quarter earnings will improve from $1.83 to $1.87 per diluted share and full-year earnings will tick up from $6.63 to $6.72 per diluted share. Both projections are based on the following annual assumptions:

— Total revenues of $7.6 to $7.8 billion

— New-vehicle sales increasing 45.0 percent

— New-vehicle gross margin of 5.9 percent to 6.1 percent

— Used vehicle sales increasing 40.0 percent

— Used vehicle gross margin of 12.6 percent to 12.8 percent

— Service body and parts sales increasing 42.0 percent

— Service body and parts gross margin of 48.8 percent to 49.2 percent

After articulating the earnings projections, DeBoer reflected on what the company has “learned” since DCH came into the fold last year.

“The DCH acquisition really taught us that as a management team we have built an autonomous type of company that the top level is there to really inspire and challenge and set clear expectations for the divisions,” he said. “So I think in terms of the perspective of acquisitions, we believe that our staple diet of one and two acquisition-type of dealerships, we still always continue.

“However, the idea of larger groups is something that will be much more simple and easier to integrate in the future especially now knowing that we can grow in both metro markets as well as in our typical exclusive markets,” DeBoer continued.

So could the Lithia footprint reach the Big Apple or the City of Angels? DeBoer didn’t seem to be ruling out the possibility and potentially “play a little bit of our previous expectations.”

He added, “I think the biggest thing that we have with DCH at this stage is the ability to open up that second door in the metro markets for growth. The ability for us to leverage their people which are very stable, they were very progressive, they are inventive, is exciting for us.

“We are looking in both metropolitan areas as well as our typical exclusive areas,” DeBoer went on to say. “I would say that our closest deals are the traditional exclusive deals. However, we have a good handful of deals that are percolating in both the LA and the New York markets, and we look forward to announcing in the coming quarters our first deal on the DCH side.”

DeBoer closed the topic by noting Lithia’s typically acquired stores that management believed to be generating average sales or perhaps even underperforming. Once acquired, DeBoer reiterated that the dealership is filled with Lithia employees who have a track record of doing well.

“We have always said that people drive the performance in stores,” DeBoer said. “We believe if the store and the franchises are the right franchises for the area, then it's a matter of bringing in new talent, and we can realize the synergies and the advantages that maybe have not been realized.”