It has been about a month since the last earnings report for Lithia Motors (LAD). Shares have added about 1.9% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Lithia Motors due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Lithia Q1 Earnings Top Estimates on Higher Aftersales Margin
Lithia posted first-quarter 2026 adjusted earnings of $7.34 per share, down 4% from $7.66 a year ago. However, the bottom line beat the Zacks Consensus Estimate of $7.06 by 4%.
Quarterly revenues rose 1% year over year to $9.27 billion but came in below the Zacks Consensus Estimate of $9.36 billion by 0.9%. Operationally, Driveway Finance Corporation generated record originations of $840 million with an 18% penetration rate and an average FICO score of 750.
LAD’s Revenue Mix Tilts Toward Used and Service
The quarter’s top-line mix showed clear relative strength in used vehicles and aftersales. Used vehicle revenues increased 7.3% year over year to $3,489.4 million, while aftersales revenues rose 6.1% to $1,042.9 million.
Same-store trends were consistent with that mix shift. Same-store used vehicle revenues increased 4.6% to $3,302.0 million, and same-store aftersales revenues advanced 3.8% to $992.1 million, reflecting steady service demand from Lithia’s growing installed base.
Those gains helped offset softer new-vehicle demand. New vehicle revenues declined 4.4% to $4,379.4 million, and finance and insurance revenues slipped 1.3% to $359.7 million, leaving total revenues modestly higher. Same-store new vehicle revenues fell 7.1% year over year, while same-store revenues from finance and insurance fell 3.8%.
Lithia’s Unit Trends Highlight Used Outperformance
Volume data reinforced the quarter’s revenue pattern. New vehicle unit sales decreased 4.7% year over year to 94,787 units, while used retail unit sales increased 2.6% to 110,151 units.
Pricing moved in opposite directions. Average selling price for new vehicles (excluding agency) edged down 0.7% to $46,878, whereas the used retail average selling price climbed 4.7% to $28,464. That combination of higher used pricing and used volumes supported the period’s used revenue growth.
LAD’s Expense Growth Pressures Operating Leverage
Profitability across major lines was mixed, with aftersales continuing to stand out. Aftersales gross margin improved 150 basis points year over year to 58.9%, while total gross profit increased 0.8% to $1,421.7 million.
By contrast, vehicle margins narrowed. New-vehicle gross margin fell 50 basis points to 5.9%, and used-vehicle gross margin decreased 40 basis points to 5.4%. Average gross profit per new vehicle declined 7.2% to $2,739, and used retail gross profit per unit slipped 4.6% to $1,688, signaling a tougher margin backdrop despite improved used pricing.
On the cost side, selling, general and administrative expenses increased 8.9% year over year to $1,037.4 million, outpacing gross profit growth and limiting operating leverage. Depreciation and amortization rose 9.2% to $69.8 million.
As a result, income from operations fell 17.4% to $335.8 million. Floor plan interest expense was $55.9 million, and other interest expense totaled $70.3 million, underscoring the sensitivity of dealership models to interest rates and inventory financing costs.
Lithia’s Noncore Items Drive GAAP-Adjusted Gap
Below operating income, other expense swung to $67.6 million in the quarter. The company’s reconciliation highlighted an investment loss of $73.3 million and contract buyouts of $20.3 million among items excluded from adjusted results.
GAAP diluted earnings per share were $4.28, and net income declined 51.7% to $102.0 million. The stores acquired during the quarter are expected to contribute $425 million in annualized revenues, keeping growth initiatives active even as reported profitability resets lower year over year.
LAD’s Balance Sheet Expands With Inventory Financing
As of March 31, 2026, Lithia’s cash, restricted cash and cash equivalents totaled $421.3 million, up from $341.8 million at year-end 2025. Inventories were $6,193.2 million, and floor plan notes payable climbed to $6,284.5 million, highlighting the financing intensity that comes with managing vehicle stock.
Within longer-dated obligations, long-term debt (net of current maturities) was $6,448.8 million, while total assets stood at $25,749.7 million. On cash flow, net cash used in operating activities was $108.4 million, and cash paid for acquisitions (net of cash acquired) was $145.3 million, alongside $97.1 million of capital expenditures.
Lithia’s Capital Returns Stay Active Amid Platform Build
The board approved a quarterly dividend of 57 cents per share, expected to be paid on May 22, 2026, to shareholders of record on May 8, 2026.
During the first quarter, the company repurchased approximately 942,000 shares at a weighted average price of $274.62, with $362.9 million remaining under the current authorization. The investor presentation also pointed to managed finance receivables of $5 billion in the quarter and net debt to adjusted EBITDA of 3.07x, metrics that help frame how the company is balancing growth, financing and shareholder returns.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Lithia Motors has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Lithia Motors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Lithia Motors, Inc. (LAD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).