Lithia’s fourth quarter saw revenue and non-GAAP earnings fall short of Wall Street expectations, with market reaction largely muted as investors weighed the company’s execution on key operational levers. Management attributed the flat top line to strong used vehicle sales and double-digit aftersales growth, which helped offset persistent margin compression in both new and used vehicles. CEO Bryan DeBoer noted, “Our value auto platform continued its strong momentum with 10.9% unit growth, demonstrating our growth at the most affordable price points,” while also acknowledging that lower gross profit per vehicle was a headwind across the industry.
Is now the time to buy LAD? Find out in our full research report (it’s free for active Edge members).
Lithia (LAD) Q4 CY2025 Highlights:
- Revenue: $9.20 billion vs analyst estimates of $9.26 billion (flat year on year, 0.6% miss)
- Adjusted EPS: $6.74 vs analyst expectations of $8.10 (16.8% miss)
- Adjusted EBITDA: $414.7 million vs analyst estimates of $400.4 million (4.5% margin, 3.6% beat)
- Operating Margin: 3.8%, in line with the same quarter last year
- Locations: 467.7 at quarter end, up from 417.3 in the same quarter last year
- Same-Store Sales were flat year on year (3.1% in the same quarter last year)
- Market Capitalization: $7.3 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Lithia’s Q4 Earnings Call
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Michael Patrick Ward (Citi) asked about the link between aftersales retention and service contract penetration. CEO Bryan DeBoer explained that service contract penetration was 37%, and aftersales growth was driven by both contract attachment and customer pay activity.
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John Murphy (Evercore ISI) inquired about SG&A as a percentage of gross profit, especially the role of M&A in recent dilution. CFO Tina Miller noted that North America SG&A was top quartile, and CEO DeBoer emphasized ongoing cost adjustments amid volume fluctuations.
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Ryan Ronald Sigdahl (Craig-Hallum) focused on sequential demand trends and DFC’s medium-term income targets. CFO Chuck Lietz responded that penetration rates hit new highs in January and forecasted a 20%+ CAGR for DFC income over the next few years.
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Rajat Gupta (JPMorgan) questioned persistent used vehicle margin pressures and aftersales growth drivers. CEO DeBoer detailed pricing model adjustments and highlighted the importance of relationship-driven service initiatives for sustained aftersales expansion.
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Daniela Marina Haigian (Morgan Stanley) asked about Lithia’s readiness for advanced vehicle technologies and credit quality trends. DeBoer cited proprietary technology as a driver of dealership service retention, while Lietz described ongoing improvements in DFC’s credit quality metrics.
Catalysts in Upcoming Quarters
In future quarters, the StockStory team will monitor (1) the impact of digital and AI-powered systems on store-level productivity and SG&A leverage, (2) progress toward DFC’s 20% penetration target and aftersales retention gains, and (3) execution on targeted M&A and the integration of newly acquired stores. We will also watch for signs of recovery in new vehicle margins and any further shifts in customer demand.
Lithia currently trades at $308.52, down from $326.55 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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