Core Insights - Lithia Motors (LAD) reported fourth-quarter 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. Revenues were flat year over year at $9.2 billion, also missing the estimate of $9.53 billion [1][10]. Segmental Performance - New vehicle revenues declined by 5.7% year over year to $4.63 billion, missing the estimate of $4.71 billion, with new vehicle units sold down 8.1% to 97,424 units, although this was above the estimate of 95,435 units [2]. - 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. The gross margin in this segment contracted by 70 basis points to 5.9%, while the cost of sales decreased by 5% year over year to $4.36 billion [3]. - 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. Used vehicle retail units sold increased by 4.8% to 99,905 units, exceeding the expectation of 94,261 units. The ASP for used vehicles was $28,533, up 3.1% year over year, also beating the estimate of $28,413. The gross margin in this segment decreased by 60 basis points to 4.7% [4]. - Finance and insurance revenues increased by 0.3% to $356.9 million, beating the estimate of $347 million. Aftersales revenues totaled $1.04 billion, up 11.4% year over year, surpassing the estimate of $972.1 million. Same-store new vehicle revenues fell by 6.6%, while same-store used vehicle sales rose by 6.1% [5]. Financial Overview - Cost of sales increased by 0.3% year over year. SG&A expenses amounted to $979.3 million, up 8.6% year over year. Adjusted SG&A as a percentage of gross profit rose to 71.4% from 66.3% in the prior-year quarter. Both pretax and net profit margins declined from the previous year [6]. - The company announced a dividend of 55 cents to be paid on March 20, 2026, to shareholders of record as of March 6, 2026. In the fourth quarter of 2025, Lithia repurchased nearly 917,427 shares at an average price of $314, with approximately $621.6 million remaining under its buyback authorization [7]. - As of December 31, 2025, Lithia had cash and cash equivalents of $341.8 million, down from $402.2 million a year earlier. Long-term debt increased to $7.27 billion from $6.12 billion [8]. Market Position - Lithia currently holds a Zacks Rank 3 (Hold). Other better-ranked stocks in the auto sector include Ford Motor (F), Modine Manufacturing (MOD), and PHINIA Inc. (PHIN), each with a Zacks Rank 1 (Strong Buy) [9].

Core Viewpoint - Lithia Motors reported strong Q3 2025 earnings, beating estimates, but shares have declined by 11.5% since the last earnings report, underperforming the S&P 500 [1][2]. Financial Performance - Adjusted earnings per share for Q3 2025 were $9.50, up from $8.21 in the prior year and exceeding the Zacks Consensus Estimate of $8.53 [2]. - Total revenues reached $9.67 billion, a 5% increase year over year, surpassing the Zacks Consensus Estimate of $9.61 billion [2]. Segmental Performance - New vehicle retail revenues increased by 4.5% year over year to $4.63 billion, exceeding estimates due to higher unit sales and average selling price (ASP) [3]. - New vehicle units sold rose by 1.8% to 96,639 units, beating the estimate of 95,276 units, with ASP increasing to $47,913 from $46,649 [3]. - Used vehicle retail revenues grew by 8.9% to $3.1 billion, surpassing estimates, driven by higher ASP [4]. - Used vehicle retail units sold increased by 4% to 109,097 units, though below expectations, with ASP rising to $28,381 [4]. - Revenues from used vehicle wholesale fell by 6.1% to $367 million, missing estimates [5]. Cost and Expenses - Cost of sales increased by 5.4% year over year, while SG&A expenses rose by 5.8% to $998 million [7]. - Adjusted SG&A as a percentage of gross profit was 67.9%, up from 66% in the prior year [7]. Cash and Debt Position - Cash and cash equivalents increased to $417.1 million as of September 30, 2025, from $402.2 million at the end of 2024 [9]. - Long-term debt rose to $6.97 billion as of September 30, 2025, up from $6.12 billion at the end of 2024 [9]. Shareholder Returns - The company announced a dividend of 55 cents per share, payable on November 21, 2025 [8]. - Lithia repurchased approximately 1,312,000 shares at an average price of $312, with $889.3 million remaining under its buyback authorization [8]. Market Outlook - Lithia Motors holds a Zacks Rank 3 (Hold), indicating an expectation of an in-line return in the coming months [13]. - The company has a strong Growth Score of A but lags in Momentum Score with a D, while maintaining an aggregate VGM Score of A [12].

Core Viewpoint - Lithia Motors (LAD) is performing well in the used vehicle and aftersales segments, but faces challenges in new vehicle profitability and consumer affordability [1]. Group 1: Company Performance - Lithia Motors is experiencing success in the used vehicle market and aftersales services, indicating strong operational performance in these areas [1]. - New vehicle profitability for Lithia Motors is under pressure, suggesting potential challenges in maintaining margins in this segment [1]. Group 2: Market Conditions - Consumer affordability remains a significant issue, which could impact sales and profitability for Lithia Motors in the new vehicle segment [1].

Company Performance - Lithia Motors reported Q2 2025 adjusted earnings per share of $10.24, up from $7.87 in the prior year, exceeding the Zacks Consensus Estimate of $9.78 [3] - Revenues for the quarter reached $9.58 billion, a 3.7% year-over-year increase, also surpassing the Zacks Consensus Estimate of $9.53 billion [3] - New vehicle retail revenues increased 2.2% year over year to $4.5 billion, although it fell short of the estimate of $4.75 billion [4] - Used vehicle retail revenues rose 3.6% year over year to $3.1 billion, exceeding the estimate of $2.9 billion [5] - Revenues from used vehicle wholesale surged 32.3% to $383 million, outperforming the estimate of $340 million [6] - Same-store new vehicle revenues increased by 2% year over year, while same-store used vehicle retail sales rose 6.5% [7] Financial Metrics - Cost of sales increased by 3.7% year over year, with SG&A expenses reported at $1.01 billion [8] - Adjusted SG&A as a percentage of gross profit decreased to 67.7% from 67.9% in the prior year [8] - The company announced a dividend of 55 cents per share, payable on August 22, 2025 [9] - As of June 30, 2025, Lithia had cash and cash equivalents of $404.4 million, up from $402.2 million at the end of 2024 [10] - Long-term debt increased to $6.7 billion from $6.1 billion as of December 31, 2024 [10] Market Outlook - Lithia Motors has a Zacks Rank of 3 (Hold), indicating an expectation of an in-line return in the coming months [14] - The stock has an average Growth Score of C, a Momentum Score of D, and a Value Score of A, resulting in an aggregate VGM Score of B [13] - In comparison, AutoNation, a peer in the automotive retail industry, reported revenues of $6.97 billion for the last quarter, reflecting a year-over-year increase of 7.6% [15]

Financial Data and Key Metrics Changes - Adjusted net income from continuing operations improved by 12.4% in the second quarter, with EPS increasing by 17.5% on the same basis [5] - Quarterly record revenues reached $5.7 billion, with gross profit at $936 million and adjusted diluted earnings per share from continuing operations at $11.52 [21] - New vehicle units sold increased by 4.66% on an as-reported basis, reflecting strong demand and operational execution [22] Business Line Data and Key Metrics Changes - U.S. new car sales were up 6% on a same-store basis, with parts and service revenues increasing by 11.7% to 12.8% [6][22] - Used vehicle revenues were the third highest on record, with a volume increase of 2.73% to 3.9% on an as-reported basis [22] - Aftersales gross profit increased by 14.3%, with customer pay revenue up 13.6% and warranty revenue up 31.9% [7][24] Market Data and Key Metrics Changes - The U.K. business showed a 96.9% to 109.6% increase in revenues and gross profit year-over-year, with used vehicles, parts and service, and F&I growing by 16% and 12% to 28.7% respectively [27] - Same-store retail used vehicle units sold in the U.K. increased over 8% year-over-year, while gross profit per unit remained relatively flat [27] Company Strategy and Development Direction - The company is focusing on improving productivity and operational efficiency, with plans to invest in technology and process improvements [19][30] - Continued investment in the aftersales business is seen as a significant opportunity, with a goal to increase customer pay and warranty revenues [8][12] - The company is balancing acquisitions and share repurchases, having acquired three dealerships in the quarter [17] Management's Comments on Operating Environment and Future Outlook - Management expressed caution moving forward due to pressures from car prices and rising interest rates affecting consumer demand [13] - The U.K. market faces macroeconomic challenges, but the company is confident in its long-term growth potential [14][16] - Management anticipates that most retailers who can drive scale and productivity will be the winners in the future [18] Other Important Information - The company has deferred certain capital expenditure projects and is reevaluating discretionary spending in light of the competitive environment [13] - The U.K. government announced subsidies for BEV vehicles, which may positively impact sales [14] Q&A Session Summary Question: How did new car GPUs progress through the quarter? - Management indicated that GPUs were strong throughout the quarter without significant spikes due to inventory changes [34][40] Question: Clarification on U.K. cost targets? - The increase in cost targets was primarily due to government-imposed increases and additional headcount reductions [36][37] Question: Sustainability of parts and service growth in the U.K.? - Management believes there is room for further growth in customer pay and plans to increase car count with more technicians [41][42] Question: Key factors for aftersales growth in the next few years? - The focus will be on reaching deeper into the owner base of older vehicles to increase market share [46][48] Question: Impact of BEV mandates on gross profit? - BEV volume is primarily going into corporate fleets, which affects retail margins [60][61] Question: Acquisition environment and opportunities? - Management noted that while the year has been quiet, there are signs of increased activity in the acquisition space [64] Question: How do lease returns affect future traffic? - Management indicated that predicting lease returns is difficult, but they are taking as many off-lease vehicles as possible [72][74] Question: U.K. SG&A costs and integration efforts? - The increase in SG&A costs was attributed to national insurance changes and ongoing integration efforts [82] Question: Confidence in customer pay growth offsetting warranty slowdowns? - Management expressed confidence in customer pay growth, although it may not fully offset warranty declines [85]