Company Strategy & Performance - Lithia & Driveway (LAD) aims for 100% national coverage and high profitability, targeting $2 EPS per $1 billion of revenue[10] - The company's 10-year Revenue CAGR is 16%, and Adjusted EPS CAGR is also 16%[10] - LAD's platform expands access to a 70% larger market compared to traditional franchise auto dealers[17] Financial Highlights & Capital Allocation - In the first six months of 2025, LAD allocated $266 million to share repurchases at an average price of $316 per share[35] - LAD targets leverage ratios in the range of 2-3X, aiming for an investment-grade rating over time[35] - LAD's EBITDA for YTD 2025 is $11078 million, and Adjusted EBITDA is $8913 million[88] Driveway Finance Corporation (DFC) - DFC targets a portfolio size of $7 billion in 2025E and $17 billion in the mid-term[49] - DFC aims for finance operations income of $50-$60 million in 2025E and $150-$200 million in the mid-term[49] - DFC's originations in Q2 2025 reached $731 million with an APR of 87%[54] Operational Efficiency & Growth - Larger stores operate more efficiently, with the smallest 3rd of stores having SG&A as a % of Gross Profit at 88%, compared to 56% for the largest 3rd[26] - The company's M&A strategy targets a 5-year return of 15% CAGR[41] - Driveway generated an average of 13 million unique visitors per month in Q2 2025[82]

Financial Data and Key Metrics Changes - The company reported record revenue of $9.6 billion for the second quarter, reflecting a 4% year-over-year same-store revenue increase [6][12] - Diluted earnings per share (EPS) increased by 29% year-over-year, reaching $9.87, with an adjusted EPS of $10.24, marking a 2530% increase year-over-year [5][6] - Adjusted EBITDA for the second quarter was $489 million, a 20% increase year-over-year [26] Business Line Data and Key Metrics Changes - Same-store aftersales gross profit grew by 8.5% year-over-year, with gross profit margin widening to 57.8%, a 180 basis point increase from last year [20][21] - Financing operations income more than doubled year-over-year from $7 million to $20 million, supported by a 50 basis point expansion in net interest margin to 4.6% [24][25] - New vehicle units increased by 2% year-over-year, while used vehicle units increased by 4% year-over-year [18][19] Market Data and Key Metrics Changes - The company noted a 50% same-store sales improvement in value auto sales compared to last year [19] - The UK market showed a 3% year-over-year profitability increase, indicating resilience despite challenging industry conditions [36] Company Strategy and Development Direction - The company aims to scale high-margin adjacencies and deepen customer relationships while maintaining capital discipline [7][12] - Strategic acquisitions remain a core pillar of growth, targeting $2 to $4 billion in annual revenue from acquisitions [14][70] - The company is focused on improving store performance and expanding its digital reach to grow U.S. market share from 1.1% to 5% [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to grow profitably and take market share, despite pressures from lower gross profit units (GPUs) [7][12] - The evolving tariff landscape and broader consumer trends are being monitored closely [7] - Management highlighted the importance of operational efficiency and cost control in navigating current market conditions [23][24] Other Important Information - Over 60% of the company's net profit comes from aftersales operations, indicating a diversified earnings stream [8][21] - The company repurchased 3% of its outstanding shares in the first half of the year, with plans to continue aggressive buybacks [15][28] Q&A Session Summary Question: Can you discuss SG&A to gross profit leverage? - Management acknowledged the need for operational improvements and emphasized the focus on driving growth and productivity [34][35] Question: How is the UK market performing? - The UK operations showed a 3% year-over-year profitability increase, with effective cost management in place [36][37] Question: How does the U.S. SG&A look? - The U.S. business continues to perform well on the SG&A front, with ongoing focus on cost control [41][42] Question: What is the outlook for DFC growth? - DFC is on a growth trajectory, with expectations for continued strong performance in the coming quarters [48][49] Question: How much of the aftersales growth is due to last year's issues? - Over 50% of the stronger same-store sales growth in aftersales can be attributed to lapping last year's CDK issues [75] Question: How will tariffs impact pricing? - Management indicated that manufacturers are already adapting to mitigate tariff impacts, and the company is well-positioned to manage these changes [98][100]

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) This section provides an overview of the company's financial and operational performance for Q2 and year-to-date 2025, highlighting key achievements [Second Quarter 2025 Performance](index=1&type=section&id=Second%20Quarter%202025%20Performance) Lithia & Driveway reported record second quarter revenue and significant increases in diluted and adjusted diluted earnings per share, alongside a rise in net income, driven by strong core operations Second Quarter 2025 Financial Performance Highlights | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Revenue | $9.6 billion | $9.2 billion | 4% | | Diluted EPS | $9.87 | $7.87 | 25% | | Adjusted Diluted EPS | $10.24 | $7.87 | 30% | | Net Income | $258 million | $217 million | 19.2% | | Adjusted Net Income | $268 million | $217 million | 24% | - Unrealized gains on investment in Pinewood Technologies Group PLC contributed **$1.03** to diluted earnings per share for the quarter[4](index=4&type=chunk) - Adjusted results for Q2 2025 exclude a **$0.37** per diluted share impact from non-core items including net loss on store disposal, insurance reserves, and acquisition expenses, partially offset by tax attributes[6](index=6&type=chunk) [Year-to-Date 2025 Performance](index=1&type=section&id=Year-to-Date%202025%20Performance) For the first six months of 2025, the company experienced robust growth in revenues and diluted earnings per share, reflecting continued operational strength Year-to-Date 2025 Financial Performance Highlights | Metric | YTD 2025 | YTD 2024 | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | | Revenues | $18.8 billion | $17.8 billion | 5% | | Diluted EPS | $17.80 | $13.75 | 29% | | Adjusted Diluted EPS | $17.88 | $13.97 | 28% | - Unrealized gains on investment in Pinewood Technologies Group PLC contributed **$0.75** to diluted earnings per share for the year-to-date period[8](index=8&type=chunk) [Key Operational Highlights](index=1&type=section&id=Key%20Operational%20Highlights) Operational excellence across the business translated into robust growth, with significant increases in gross profits, aftersales, and financing operations profitability, alongside strategic share repurchases - Total gross profits increased **4.3%** compared to Q2 2024[10](index=10&type=chunk) - Aftersales gross profit increased **11.5%** compared to Q2 2024[10](index=10&type=chunk) - Financing operations generated profitability of **$20 million**, a **179%** increase year-over-year[10](index=10&type=chunk) - Driveway Finance Corporation (DFC) originated **$731 million** in loans, with U.S. penetration increasing to **14.8%** and net interest margin increasing to **4.6%**[10](index=10&type=chunk) - Repurchased **1.5%** of outstanding shares during the quarter[10](index=10&type=chunk) [Corporate Developments](index=1&type=section&id=Corporate%20Developments) This section details recent strategic acquisitions and their expected impact on the company's annualized revenue [Acquisitions](index=1&type=section&id=Acquisitions) Lithia & Driveway continued its network expansion in the Southeast region through strategic acquisitions, adding significant annualized revenue - In June 2025, LAD acquired two Mercedes-Benz stores in Collierville, Tennessee, and Jackson, Mississippi, adding **$220 million** of expected annualized revenue[9](index=9&type=chunk) - Year-to-date, the company has acquired **$400 million** of expected annualized revenues[11](index=11&type=chunk) [Capital Allocation](index=3&type=section&id=Capital%20Allocation) This section outlines the company's financial position, including liquidity, dividend policy, and share repurchase activities [Balance Sheet Overview](index=3&type=section&id=Balance%20Sheet%20Overview) The company maintained a strong liquidity position at the end of the second quarter - LAD ended the second quarter with approximately **$1.3 billion** in cash and cash equivalents, marketable securities, and availability on revolving lines of credit[12](index=12&type=chunk) [Dividend and Share Repurchases](index=3&type=section&id=Dividend%20and%20Share%20Repurchases) The Board of Directors approved a quarterly dividend and the company continued its share repurchase program, reducing outstanding shares Second Quarter 2025 Dividend | Item | Value | | :----- | :---- | | Dividend per Share | $0.55 | | Payment Date | August 22, 2025 | | Record Date | August 8, 2025 | - During Q2 2025, approximately **387,000 shares** were repurchased at a weighted average price of **$306**[14](index=14&type=chunk) - Year-to-date 2025, approximately **791,000 shares** have been repurchased at a weighted average price of **$316**, with **$568.8 million** remaining under current authorization[14](index=14&type=chunk) [Management Update](index=3&type=section&id=Management%20Update) This section provides an update on key personnel changes within the company's leadership team [Chief People Officer Retirement](index=3&type=section&id=Chief%20People%20Officer%20Retirement) The company announced the upcoming retirement of its Chief People Officer, with succession planning underway - Gary Glandon will retire from his role as Chief People Officer effective December 31, 2025, with a successor to be announced prior to his retirement[15](index=15&type=chunk) [Investor Information](index=3&type=section&id=Investor%20Information) This section offers details for investor engagement and provides an overview of Lithia & Driveway's business model and strategic objectives [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Details for accessing the second quarter 2025 earnings conference call and related presentation were provided - The second quarter 2025 conference call was scheduled for 10:00 a.m. ET on July 29, 2025, accessible via telephone or the investor relations website[16](index=16&type=chunk) [About Lithia & Driveway](index=3&type=section&id=About%20Lithia%20%26%20Driveway) Lithia & Driveway is described as the largest global automotive retailer, offering a comprehensive range of products and services throughout the vehicle ownership lifecycle - Lithia & Driveway (NYSE: LAD) is the largest global automotive retailer, providing products and services through physical locations, e-commerce platforms, captive finance, and fleet management[17](index=17&type=chunk) - The company aims to deliver consistent, profitable growth in the unconsolidated automotive industry by modernizing personal transportation solutions[17](index=17&type=chunk) [Legal & Financial Disclosures](index=4&type=section&id=Legal%20%26%20Financial%20Disclosures) This section clarifies the nature of forward-looking statements and the use of non-GAAP financial measures in the report [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the nature of forward-looking statements, inherent uncertainties, risks, and the company's policy on updating such statements - Forward-looking statements are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and may cause actual results to differ materially[20](index=20&type=chunk) - Examples of forward-looking statements include projections regarding profitability acceleration, market conditions, business strategy, network growth, Driveway and DFC performance, capital allocations, and future economic conditions[21](index=21&type=chunk) - The company undertakes no obligation to publicly update any forward-looking statement, except as required by law[22](index=22&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) The company provides an explanation of its use of non-GAAP financial measures, their definitions, and their purpose in improving transparency and comparability of core business operations - Non-GAAP financial measures, such as adjusted net income and adjusted diluted EPS, are presented to improve transparency and provide a meaningful presentation of results from core business operations by excluding non-core and non-cash items[23](index=23&type=chunk) - These measures do not have definitions under GAAP, may differ from those used by other companies, and should not be considered an alternative to GAAP measures[23](index=23&type=chunk) - Reconciliations to the most directly comparable GAAP measures are provided in the attachments to the release[23](index=23&type=chunk) [Financial Statements & Supplementary Data](index=6&type=section&id=Financial%20Statements%20%26%20Supplementary%20Data) This section presents detailed unaudited financial statements and key performance metrics for the reported periods [Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) This section presents the company's consolidated revenues, cost of sales, gross profit, and net income for the three and six months ended June 30, 2025, and 2024, highlighting key changes Consolidated Statements of Operations Summary | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Q2 YoY Change (%) | YTD 2025 (Millions) | YTD 2024 (Millions) | YTD YoY Change (%) | | :-------------------------- | :----------------- | :----------------- | :---------------- | :------------------ | :------------------ | :----------------- | | Total Revenues | $9,583.0 | $9,231.8 | 3.8% | $18,761.2 | $17,793.6 | 5.4% | | Gross Profit | $1,485.1 | $1,423.9 | 4.3% | $2,895.4 | $2,759.1 | 4.9% | | Finance operations income | $20.1 | $7.2 | 179.2% | $32.6 | $5.4 | 503.7% | | Income from operations | $425.3 | $393.6 | 8.1% | $831.6 | $735.0 | 13.1% | | Net income attributable to LAD | $256.1 | $214.2 | 19.6% | $465.6 | $376.7 | 23.6% | | Diluted EPS attributable to LAD | $9.87 | $7.87 | 25.4% | $17.80 | $13.75 | 29.5% | [Key Performance Metrics (Unaudited)](index=7&type=section&id=Key%20Performance%20Metrics) This section details key operational and financial performance indicators, including gross margins, unit sales, average selling prices, and gross profit per unit across various segments, along with SG&A efficiency Key Performance Metrics - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------- | :------ | :------ | :----- | | New vehicle retail gross margin | 6.7% | 7.3% | (60)bps | | Used vehicle retail gross margin | 6.7% | 6.5% | 20bps | | Aftersales gross margin | 57.7% | 55.7% | 200bps | | Total gross profit margin | 15.5% | 15.4% | 10bps | | New vehicle retail unit sales | 94,144 | 92,508 | 1.8% | | Used vehicle retail unit sales | 109,053 | 109,249 | (0.2)% | | New vehicle retail avg selling price | $47,782 | $47,603 | 0.4% | | Used vehicle retail avg selling price | $28,379 | $27,332 | 3.8% | | New vehicle retail avg gross profit per unit | $3,181 | $3,467 | (8.2)% | | Used vehicle retail avg gross profit per unit | $1,911 | $1,790 | 6.8% | | Finance and insurance avg gross profit per unit | $1,840 | $1,789 | 2.9% | | SG&A as a % of revenue (Adjusted) | 10.5% | 10.5% | — | | SG&A as a % of gross profit (Adjusted) | 67.7% | 67.9% | (20)bps | [Same Store Operating Highlights (Unaudited)](index=8&type=section&id=Same%20Store%20Operating%20Highlights) This section provides a detailed breakdown of performance for same-store operations, including revenues, gross profit, gross margin, unit sales, average selling price, and average gross profit per unit for Q2 and YTD Same Store Operating Highlights - Q2 2025 vs Q2 2024 | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Q2 YoY Change (%) | | :-------------------------- | :----------------- | :----------------- | :---------------- | | Total revenues | $9,345.2 | $8,974.1 | 4.1% | | Total gross profit | $1,451.6 | $1,389.8 | 4.4% | | New vehicle retail gross margin | 6.7% | 7.2% | (50)bps | | Used vehicle retail gross margin | 6.7% | 6.9% | (20)bps | | Aftersales gross margin | 57.8% | 56.0% | 180bps | | New vehicle retail unit sales | 91,947 | 90,179 | 2.0% | | Used vehicle retail unit sales | 106,894 | 102,875 | 3.9% | | New vehicle retail avg gross profit per unit | $3,175 | $3,455 | (8.1)% | | Used vehicle retail avg gross profit per unit | $1,900 | $1,897 | 0.2% | [Other Operating Highlights (Unaudited)](index=9&type=section&id=Other%20Operating%20Highlights) This section provides insights into the geographical distribution of revenue and gross profit, as well as inventory days' supply for new and used vehicles Key Performance by Country (Q2 2025) | Country | Total Revenue | Total Gross Profit | | :------------ | :------------ | :----------------- | | United States | 78.1% | 83.7% | | United Kingdom | 18.3% | 13.3% | | Canada | 3.6% | 3.0% | Days' Supply in Inventory (June 30, 2025) | Inventory Type | Days' Supply | | :--------------- | :----------- | | New vehicle | 63 | | Used vehicle | 48 | [Selected Financing Operations Financial Information](index=9&type=section&id=Selected%20Financing%20Operations%20Financial%20Information) This section details the financial performance of the company's financing operations, including interest and fee income, interest expense, total interest margin, and lease income Financing Operations Financial Information - Q2 2025 vs Q2 2024 (Millions) | Metric | Q2 2025 | Q2 2024 | Q2 YoY Change (%) | | :-------------------------- | :------ | :------ | :---------------- | | Interest and fee income | $98.8 | $83.8 | 17.9% | | Interest expense | $(49.8) | $(47.0) | 6.0% | | Total interest margin | $49.0 | $36.8 | 33.2% | | Lease income, net | $5.1 | $1.7 | 200.0% | | Finance operations income | $20.1 | $7.2 | 179.2% | | Total average managed finance receivables | $4,287.6 | $3,632.0 | 18.0% | [Condensed Consolidated Balance Sheets (Unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, compared to December 31, 2024 Condensed Consolidated Balance Sheet Highlights (Millions) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current assets | $7,941.8 | $7,773.9 | | Total assets | $24,161.0 | $23,122.6 | | Total current liabilities | $6,513.5 | $6,551.1 | | Total liabilities | $17,150.0 | $16,448.5 | | Equity | $7,011.0 | $6,674.1 | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Cash Flows Highlights (Millions) | Activity | YTD 2025 | YTD 2024 | | :-------------------------------- | :------- | :------- | | Net cash provided by operating activities | $331.4 | $144.0 | | Net cash used in investing activities | $(315.5) | $(1,515.1) | | Net cash (used in) provided by financing activities | $(13.5) | $1,117.6 | | Change in cash, restricted cash, and cash equivalents | $9.8 | $(256.6) | | Cash, restricted cash, and cash equivalents at end of period | $455.6 | $715.4 | [Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited)](index=11&type=section&id=Reconciliation%20of%20Non-GAAP%20Cash%20Flow%20from%20Operations) This section reconciles the reported net cash provided by operating activities to an adjusted non-GAAP measure, incorporating adjustments related to floor plan notes payable and finance receivables Reconciliation of Non-GAAP Cash Flow from Operations (Millions) | Metric | YTD 2025 | YTD 2024 | | :---------------------------------------------------------------- | :------- | :------- | | Net cash provided by operating activities (As reported) | $331.4 | $144.0 | | Floor plan notes payable, non-trade, net | $(141.2) | $444.5 | | Adjust: finance receivables activity | $432.1 | $386.9 | | Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory | $(45.6) | $(22.7) | | Adjusted Net cash provided by operating activities | $576.7 | $952.7 | [Reconciliation of Certain Non-GAAP Financial Measures (Unaudited) - Three Months Ended June 30](index=12&type=section&id=Reconciliation%20of%20Certain%20Non-GAAP%20Financial%20Measures%20(Q2)) This section provides a detailed reconciliation of GAAP financial measures to adjusted non-GAAP measures for the three months ended June 30, 2025, and 2024, by excluding specific non-core items Q2 2025 Non-GAAP Reconciliation (Millions, except per share data) | Metric | As reported | Net loss on disposal of stores | Insurance reserves | Acquisition expenses | Tax attribute | Adjusted | | :-------------------------------- | :---------- | :----------------------------- | :----------------- | :----------------- | :------------ | :--------- | | Selling, general and administrative | $1,014.7 | $(7.2) | $(2.4) | $(0.1) | $— | $1,005.0 | | Net income attributable to LAD | $256.1 | $9.0 | $1.8 | $0.1 | $(1.3) | $265.7 | | Diluted earnings per share attributable to LAD | $9.87 | $0.35 | $0.07 | $— | $(0.05) | $10.24 | Q2 2024 Non-GAAP Reconciliation (Millions, except per share data) | Metric | As reported | Insurance reserves | Acquisition expenses | Tax attribute | Adjusted | | :-------------------------------- | :---------- | :----------------- | :----------------- | :------------ | :--------- | | Selling, general and administrative | $975.2 | $(6.1) | $(1.8) | $— | $967.3 | | Net income attributable to LAD | $214.2 | $4.5 | $3.1 | $(7.6) | $214.2 | | Diluted earnings per share attributable to LAD | $7.87 | $0.17 | $0.11 | $(0.28) | $7.87 | [Reconciliation of Certain Non-GAAP Financial Measures (Unaudited) - Six Months Ended June 30](index=13&type=section&id=Reconciliation%20of%20Certain%20Non-GAAP%20Financial%20Measures%20(YTD)) This section provides a detailed reconciliation of GAAP financial measures to adjusted non-GAAP measures for the six months ended June 30, 2025, and 2024, by excluding specific non-core items YTD 2025 Non-GAAP Reconciliation (Millions, except per share data) | Metric | As reported | Net gain on disposal of stores | Insurance reserves | Acquisition expenses | Tax attribute | Adjusted | | :-------------------------------- | :---------- | :----------------------------- | :----------------- | :----------------- | :------------ | :--------- | | Selling, general and administrative | $1,967.4 | $2.2 | $(2.8) | $(0.3) | $— | $1,966.5 | | Net income attributable to LAD | $465.6 | $2.1 | $2.1 | $0.2 | $(2.3) | $467.7 | | Diluted earnings per share attributable to LAD | $17.80 | $0.08 | $0.08 | $0.01 | $(0.09) | $17.88 | YTD 2024 Non-GAAP Reconciliation (Millions, except per share data) | Metric | As reported | Insurance reserves | Acquisition expenses | Tax attribute | Adjusted | | :-------------------------------- | :---------- | :----------------- | :----------------- | :------------ | :--------- | | Selling, general and administrative | $1,909.5 | $(6.1) | $(9.5) | $— | $1,893.9 | | Net income attributable to LAD | $376.7 | $4.5 | $9.2 | $(7.6) | $382.8 | | Diluted earnings per share attributable to LAD | $13.75 | $0.17 | $0.33 | $(0.28) | $13.97 | [Adjusted EBITDA and Net Debt to Adjusted EBITDA (Unaudited)](index=14&type=section&id=Adjusted%20EBITDA%20and%20Net%20Debt%20to%20Adjusted%20EBITDA) This section provides the calculation of EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2025, and 2024, along with the Net Debt to Adjusted EBITDA ratio EBITDA and Adjusted EBITDA Highlights (Millions) | Metric | Q2 2025 | Q2 2024 | Q2 YoY Change (%) | YTD 2025 | YTD 2024 | YTD YoY Change (%) | | :-------------- | :------ | :------ | :---------------- | :------- | :------- | :---------------- | | EBITDA | $588.8 | $529.9 | 11.1% | $1,107.8 | $980.2 | 13.0% | | Adjusted EBITDA | $489.3 | $408.2 | 19.9% | $891.3 | $751.6 | 18.6% | Net Debt to Adjusted EBITDA | Metric | June 30, 2025 | June 30, 2024 | Change (%) | | :---------------------- | :------------ | :------------ | :--------- | | Net Debt | $4,223.1 | $3,848.4 | 9.7% | | TTM Adjusted EBITDA | $1,698.0 | $1,601.8 | 6.0% | | Net Debt to Adjusted EBITDA | 2.49 x | 2.40 x | — |

Core Viewpoint - Lithia Motors reported quarterly earnings of $10.24 per share, exceeding the Zacks Consensus Estimate of $9.78 per share, and showing an increase from $7.87 per share a year ago, indicating a positive earnings surprise of +4.70% [1][2] Financial Performance - The company achieved revenues of $9.58 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.52%, and up from $9.23 billion in the same quarter last year [2] - Over the last four quarters, Lithia Motors has exceeded consensus EPS estimates three times and topped revenue estimates twice [2] Stock Performance - Lithia Motors shares have declined approximately 14.1% since the beginning of the year, contrasting with the S&P 500's gain of 8.6% [3] - The current Zacks Rank for Lithia Motors is 3 (Hold), suggesting that the shares are expected to perform in line with the market in the near future [6] Future Outlook - The consensus EPS estimate for the upcoming quarter is $8.88 on revenues of $9.83 billion, while for the current fiscal year, the estimate is $35.14 on revenues of $38.55 billion [7] - The outlook for the automotive retail and wholesale industry, where Lithia Motors operates, is currently in the bottom 37% of Zacks industries, which may impact stock performance [8]

Core Insights - Lithia & Driveway reported record second quarter revenue of $9.6 billion, a 4% increase from $9.2 billion in Q2 2024, and a 25% increase in diluted earnings per share (EPS) to $9.87 from $7.87 in the same period last year [1][2][22]. Financial Performance - The second quarter 2025 net income was $258 million, representing a 19.2% increase compared to $217 million in Q2 2024. Adjusted net income for the same period was $268 million, a 24% increase from $217 million in 2024 [3][4]. - For the first half of 2025, revenues increased by 5% to $18.8 billion from $17.8 billion in 2024. Diluted EPS for the first six months was $17.80, a 29% increase from $13.75 in 2024 [5][6]. Corporate Development - In June 2025, Lithia & Driveway expanded its network by acquiring two Mercedes-Benz stores in Tennessee and Mississippi, expected to generate $220 million in annualized revenue. Year-to-date acquisitions are projected to contribute $400 million in expected annualized revenues [7]. Balance Sheet and Cash Flow - The company ended Q2 2025 with approximately $1.3 billion in cash and cash equivalents, marketable securities, and available credit [8]. - Cash flows from operating activities for the first half of 2025 were reported at $331.4 million, compared to $144.0 million in 2024 [27]. Shareholder Returns - The Board of Directors approved a dividend of $0.55 per share for Q2 2025, to be paid on August 22, 2025 [9]. - The company repurchased approximately 387,000 shares at an average price of $306 during Q2 2025, with a total of 791,000 shares repurchased in 2025 at an average price of $316 [10]. Operational Highlights - Total gross profits increased by 4.3% compared to Q2 2024, with aftersales gross profit rising by 11.5% [14]. - Driveway Finance Corporation originated $731 million in loans, with U.S. penetration increasing to 14.8% and net interest margin rising to 4.6% [14].

Company Overview - Lithia Motors (LAD) is expected to report a year-over-year increase in earnings, with quarterly earnings projected at $8.96 per share, reflecting a +13.9% change, and revenues anticipated to reach $9.53 billion, up 3.3% from the previous year [3][12] Earnings Expectations - The upcoming earnings report is scheduled for July 29, and the stock may experience upward movement if the reported numbers exceed expectations, while a miss could lead to a decline [2][12] - The consensus EPS estimate has been revised 0.69% lower over the last 30 days, indicating a reassessment by analysts [4] Earnings Surprise Prediction - Lithia Motors has a positive Earnings ESP of +6.55%, suggesting analysts have become more optimistic about the company's earnings prospects [12] - The stock currently holds a Zacks Rank of 3, indicating a hold position, which combined with the positive Earnings ESP suggests a likelihood of beating the consensus EPS estimate [12] Historical Performance - In the last reported quarter, Lithia Motors was expected to post earnings of $7.77 per share but delivered $7.66, resulting in a surprise of -1.42% [13] - Over the past four quarters, the company has surpassed consensus EPS estimates three times [14] Industry Context - Group 1 Automotive (GPI), a peer in the automotive retail and wholesale industry, is expected to report earnings of $10.31 per share, reflecting a +5.2% year-over-year change, with revenues projected at $5.55 billion, up 18.2% [18][19] - Group 1 Automotive also has a positive Earnings ESP of +2.67% and a Zacks Rank of 3, indicating a similar likelihood of beating consensus EPS estimates [19][20]

Core Insights - Zacks Premium provides various tools for investors to enhance their stock market engagement and confidence [1][2] Zacks Style Scores - Zacks Style Scores rate stocks based on value, growth, and momentum, serving as complementary indicators to the Zacks Rank [3] - Stocks are rated from A to F, with A indicating the highest potential for market outperformance [4] Value Score - The Value Style Score focuses on identifying undervalued stocks using metrics like P/E, PEG, and Price/Sales ratios [4] Growth Score - The Growth Style Score assesses a company's financial health and future outlook through projected earnings and sales [5] Momentum Score - The Momentum Style Score identifies optimal entry points based on price trends and earnings estimate changes [6] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for stock selection [7] Zacks Rank - The Zacks Rank utilizes earnings estimate revisions to simplify portfolio building, with 1 (Strong Buy) stocks averaging a +23.62% annual return since 1988 [8][9] - There are over 800 top-rated stocks available, making selection challenging for investors [9] Stock Selection Strategy - For optimal returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [10] - Stocks with a 3 (Hold) rank should also have A or B Scores to maximize upside potential [10] Company Spotlight: Lithia Motors - Lithia Motors, Inc. is a leading automotive retailer in the U.S., offering 52 vehicle brands across 459 locations [12] - Currently rated 3 (Hold) with a VGM Score of A and a Value Style Score of A, indicating attractive valuation metrics [12][13] - The company has seen upward revisions in earnings estimates, with a Zacks Consensus Estimate of $33.67 per share for fiscal 2025 [13]

Industry Overview - The Zacks Auto Retail and Wholesale industry is experiencing significant changes due to evolving consumer habits, policy shifts, and strategic actions by key players [1][3] - The industry is consumer-driven, with performance closely tied to economic conditions, where increased disposable income typically leads to higher vehicle purchases [3] - The COVID-19 pandemic has accelerated the industry's shift towards online tools and e-commerce, a trend expected to continue [3] Factors Influencing Industry Dynamics - Car affordability has seen a modest improvement due to rising consumer incomes and dealer incentives, but tariffs on imported vehicles continue to pose challenges, potentially adding up to $5,700 to the cost of new cars [4] - The EV market is in a transitional phase, with first-half 2025 U.S. EV sales reaching 607,089 units, a 1.5% year-over-year increase, but a decline in demand is anticipated in the fourth quarter without government subsidies [5] - Auto retailers are making strategic acquisitions to enhance market share and diversify offerings, while also investing in digital platforms to meet changing customer expectations [2][6][7] Market Performance - The Zacks Auto Retail & Wholesale industry ranks 91, placing it in the top 37% of 245 Zacks industries, indicating positive near-term prospects [8][9] - Over the past year, the industry has outperformed the S&P 500, returning 16.3% compared to the S&P 500's 12.6% growth [10] Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 8.95X, significantly lower than the S&P 500's 17.64X and the sector's 20.66X [13] Company Highlights - **Penske Automotive**: Completed acquisitions in 2024 representing nearly $2.1 billion in annualized revenues, with a strong order backlog and a low long-term debt-to-capitalization ratio of 15.5% [17][18] - **Lithia Motors**: Expanded its footprint through acquisitions, adding $3.8 billion in 2023 and $5.9 billion in 2024 in annualized revenues, with a focus on digital platforms to enhance customer experience [22][23] - **AutoNation**: Continues to grow through strategic acquisitions and digital transformation, with a recent purchase expected to add $200 million in annual revenues [25][26] - **Group 1 Automotive**: Achieved significant revenue growth through acquisitions, adding over $1 billion in 2023 and $3.9 billion in 2024, while focusing on an omnichannel strategy [31][32]

Core Insights - Lithia Motors, Inc. (LAD) reported strong preliminary financial results for Q2 2025, with expected earnings per diluted share between $9.70 and $10.00, reflecting a year-over-year increase of 23-27% [1][9] - The company's revenue is projected to be between $9.4 billion and $9.6 billion, driven by a same-store total revenue growth of 3.5% to 4.0% [2][9] - Lithia's financing operations showed significant year-on-year growth of 110-155%, contributing income between $15 million and $18 million [2] Business Strategy and Performance - Lithia's integrated business model, including diverse revenue streams, has demonstrated earnings growth and scalability, outperforming peers with flat results [3] - The company has effectively created synergies through its diversified lines, including Driveway, GreenCars, and Driveway Finance Corporation, enabling growth across various customer channels [3] - Lithia has repurchased 3% of its outstanding shares this year, with 1.5% repurchased in the latest quarter, indicating a disciplined approach to capital allocation [4] Acquisitions and Growth - In 2025, Lithia has acquired $400 million in annualized revenues, including two Mercedes-Benz dealerships in Tennessee and Mississippi, contributing to its growth strategy [4][9] - The company is on a path of acquisitions to secure steady revenues, benefiting from a varied product mix [4] Market Performance - Lithia's shares have increased by 25.3% over the past year, outperforming the industry average growth of 15.5% [6]

Core Insights - Lithia & Driveway (LAD) reported preliminary financial results for Q2 2025, expecting net income per diluted share between $9.70 and $10.00, reflecting a year-over-year increase of 23% to 27% compared to Q2 2024, significantly outperforming market expectations [1][2][3] Financial Performance - Total revenues for Q2 2025 are projected to be between $9.4 billion and $9.6 billion [7] - Same store total revenue growth is anticipated to be between 3.5% and 4.0% [7] - Financing operations income is expected to be between $15 million and $18 million, marking a year-over-year increase of 110% to 155% [7] - Share repurchases accounted for 1.5% of shares outstanding during Q2 and 3.0% year-to-date [7] Operational Strength - The results highlight the operational excellence across all business lines, contributing to strong top and bottom-line performance [3] - The scalability of LAD's ecosystem is demonstrating earnings growth and capital efficiency [3] - The integrated model, including DFC, Driveway, and GreenCars, is enhancing market share and performance differentiation [3][4] Strategic Outlook - The company emphasizes the strength and durability of its business model, with a noted 35% year-over-year increase in earnings per share in the previous quarter [4] - The management is focused on unlocking the potential of its ecosystem in 2025 and beyond [4] - The company aims to modernize personal transportation solutions through a diversified and competitively differentiated design [5]