Lithia Motors (LAD) Down 16% Since Last Earnings Report: Can It Rebound?

Core Viewpoint - Lithia Motors has experienced a decline in share price by approximately 16% since its last earnings report, underperforming the S&P 500, raising questions about its future performance leading up to the next earnings release [1] Financial Performance - Lithia reported Q4 2025 adjusted earnings per share of $6.74, a decrease from $7.79 in the prior-year quarter, missing the Zacks Consensus Estimate of $8.09 [2] - Revenues for the quarter were $9.2 billion, flat year over year, and also missed the Zacks Consensus Estimate of $9.53 billion [2] Segmental Performance - New vehicle revenues fell by 5.7% year over year to $4.63 billion, missing the estimate of $4.71 billion, with new vehicle units sold declining by 8.1% to 97,424 units, although this was above the estimate of 95,435 units [3] - The average selling price (ASP) of new vehicles increased to $48,239 from $47,478 in the prior-year quarter but fell short of the estimate of $49,401, with gross margin contracting by 70 basis points to 5.9% [4] - Used vehicle revenues rose by 6.7% year over year to $3.2 billion, surpassing the estimate of $2.68 billion, driven by higher unit sales and ASP, with used vehicle retail units sold increasing by 4.8% to 99,905 units [5] - The ASP of used vehicles was $28,533, up 3.1% year over year, exceeding the estimate of $28,413, although gross margin decreased by 60 basis points to 4.7% [5] - Finance and insurance revenues increased by 0.3% to $356.9 million, beating the estimate of $347 million, while aftersales revenues totaled $1.04 billion, up 11.4% year over year, also exceeding the estimate of $972.1 million [6] Cost and Expenses - Cost of sales increased by 0.3% year over year, while SG&A expenses rose by 8.6% to $979.3 million, with adjusted SG&A as a percentage of gross profit increasing to 71.4% from 66.3% in the prior-year quarter [7] Shareholder Returns - The company announced a dividend of 55 cents to be paid on March 20, 2026, to shareholders of record as of March 6, 2026, and repurchased nearly 917,427 shares at an average price of $314 [8] Financial Position - As of December 31, 2025, Lithia had cash and cash equivalents of $341.8 million, down from $402.2 million a year earlier, while long-term debt increased to $7.27 billion from $6.12 billion [9] Market Sentiment - Since the earnings release, there has been a flat trend in estimates review, indicating a lack of significant changes in market expectations [10] - Lithia Motors currently holds a Zacks Rank 3 (Hold), suggesting an expectation of an in-line return from the stock in the coming months [13]