Lithia’s third quarter reflected stable execution, with both revenue and adjusted earnings surpassing Wall Street expectations, while the market reaction was muted. Management highlighted accelerated growth in used vehicles and aftersales as primary drivers, with CEO Bryan DeBoer citing a “focus on execution” that led to improved same-store sales across all business lines. The company also benefited from cost control efforts and enhanced integration of digital platforms, supporting a more durable earnings mix and improved cash flows.

Is now the time to buy LAD? Find out in our full research report (it’s free for active Edge members).

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 Q3 Earnings Call

• Ryan Sigdahl (Craig Hallum Capital Group) asked about the impact of expiring EV tax credits. CEO Bryan DeBoer explained that strong manufacturer incentives and high lease penetration helped clear inventory, noting, “Most of those vehicles were leased,” which supports future customer retention.

• Federico Merendi (Bank of America) inquired about exposure to subprime credit in used vehicle sales. DeBoer clarified that value autos are often purchased by higher-credit customers paying cash, and that the company’s disciplined underwriting keeps credit risk low.

• Michael Ward (Citi Research) questioned new vehicle gross profit performance, especially given EV inventory push. CFO Tina Miller confirmed margins on BEVs were lower, but overall new vehicle gross profit remained competitive due to strong execution and incentive management.

• Rajat Gupta (JPMorgan) sought clarity on acquisition targets and capital allocation. DeBoer emphasized that the $2 billion acquisition revenue target is a “hard number,” and that excess capital would favor buybacks if acquisition opportunities do not meet return thresholds.

• Jeffrey Lick (Stephens Inc.) asked about aftersales gross margin improvement. DeBoer attributed the gains to a higher mix of labor-intensive service work and inflation-driven rate increases, with Miller noting strong performance in both customer pay and warranty categories.

Catalysts in Upcoming Quarters

In the quarters ahead, our analysts will be focused on (1) the sustainability of used vehicle volume gains and continued success in sourcing directly from consumers, (2) progress in integrating digital platforms and expanding aftersales gross profit, and (3) the pace and profitability of targeted U.S. acquisitions. Monitoring cost control initiatives and any shifts in tariffs or labor inflation will also be key to assessing execution against strategic goals.

Lithia currently trades at $318.36, up from $312.22 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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