Lithia & Driveway (LAD) Reports Q4 and Full Year 2025 Results
Shares of Lithia & Driveway (LAD) fell approximately 2% to around $319 in trading following the release of fourth-quarter results (closing at $320.41 on February 11, 2026, down 1.88% or $6.14 from prior close). The automotive retailer reported a sharp decline in fourth-quarter profitability despite record full-year revenue. Fourth-quarter net income dropped 35.5% as vehicle margins compressed across the industry amid normalizing supply and pricing. The stock has traded in a 52-week range of $262.10 to $405.14 and remains approximately 21% below its annual high.
Company Description
Lithia & Driveway is one of the largest global automotive retailers, operating a network of over 300 stores across North America and the United Kingdom. The business model integrates new and used vehicle sales, aftersales services (parts and repair), and captive financing through its Driveway Finance Corporation (DFC). The company serves a diverse consumer base through its physical dealerships and its digital platforms, Driveway and GreenCars.
Current Stock Price
$320.41
Market Capitalization
Approximately $7.7–8 billion (based on recent levels)
Valuation
Lithia & Driveway trades at a forward price-to-earnings (P/E) ratio in the low double digits. This multiple reflects market caution regarding the normalization of vehicle gross profit per unit (GPU) and the impact of sustained interest rates on consumer affordability and floor plan interest costs.
Q4 and Fiscal Year 2025 Financial Performance Summary
The company reported record top-line results for the full year, though quarterly earnings faced pressure from normalizing supply and pricing.
- Revenue Performance: Fourth-quarter revenue rose 0.3% to $9.20 billion (from $9.17 billion in Q4 2024). Full-year 2025 revenue hit a record $37.6 billion (or precisely $37.63 billion in some reports), up 4.0% year-over-year.
- Earnings: Fourth-quarter diluted EPS was $5.72, a 28% decrease from $7.98 in the prior-year period (net income declined 35.5% to $137.9 million). Adjusted diluted EPS was $6.74, down 12% from $7.62 (missing analyst expectations). Full-year diluted EPS rose 10% to $32.32; adjusted diluted EPS increased 16% to $33.46.
- Segment Margins: New vehicle gross margins compressed (specific full-year figure ~6–7% range implied by trends); total vehicle GPU was $3,946 in Q4, a decrease of $258 per unit year-over-year. Aftersales revenue increased 10.9% with a gross margin of 57.3%.
- Growth Drivers: Used vehicle revenue grew 6.1% in Q4 (outperforming the market), while aftersales remained a strong contributor.
Management Focuses on Efficiency and Financing Scale
On the earnings call, management detailed a shift toward cost discipline and the expansion of its high-margin finance arm.
- Driveway Finance (DFC): DFC generated strong growth, with full-year pre-tax income of approximately $75 million (up significantly, including a ~$19 million quarterly year-over-year increase in some periods); managed receivables grew 23% to $4.8 billion; penetration reached ~16.7–17% in late periods (targeting higher).
- Capital Allocation: The company executed aggressive share repurchases in 2025 (reducing outstanding shares notably, with capital deployment including buybacks at average prices in the low-to-mid $300s). Management continues to prioritize disciplined capital return alongside M&A.
- Operational Targets: CEO Bryan DeBoer reiterated long-term M&A targets of $2 billion to $4 billion in acquired revenue annually, noting recent acquisitions (e.g., eleven stores in Q4 across North America and the UK contributing to growth).
Macro Pressures and Geopolitical Risk
LAD faces significant headwinds from a “normalizing” inventory environment that has reduced the scarcity premiums seen in previous years.
- Tariff Impact: Implementation and expansion of duties (e.g., on imported steel and aluminum) in 2025 have increased manufacturing costs for OEMs, with some pass-through to retailers via higher wholesale prices. Management noted softening demand late in Q4 limited full cost recovery to consumers.
- Geopolitical Exposure: Expansion in the United Kingdom and Canada (which contributed to Q4 growth) exposes the company to foreign currency fluctuations and localized regulatory shifts regarding electric vehicle mandates.
- Consensus Forecast: Analysts maintain median price targets in the mid-to-high $300s (e.g., around $350–$397 in various reports). Recent revisions reflect concern over SG&A as a percentage of gross profit (elevated in Q4) and ongoing margin pressures.
Lithia & Driveway (LAD) SWOT Analysis
Strengths
- Scale and Diversification: Largest global auto retailer with strong multi-national presence and high-margin aftersales business.
- Captive Finance Momentum: Driveway Finance (DFC) delivering recurring, high-growth income with expanding penetration and receivables.
- Aggressive Share Repurchases: Meaningful reduction in share count in 2025, supporting EPS accretion.
Weaknesses
- Margin Compression: Industry-wide decline in vehicle GPUs (e.g., $258 drop in Q4 total vehicle GPU) impacting bottom-line growth.
- SG&A Deleverage: Rising costs relative to gross profit as market conditions normalize.
- High Leverage: Significant floor plan interest expense sensitivity in a high-rate environment.
Opportunities
- M&A Consolidation: Target of $2B–$4B in annual acquired revenue in a fragmented dealership market.
- Digital Platform Expansion: Driveway and GreenCars platforms offer lower-cost customer acquisition.
- Value-Price Growth: Strong performance in “value auto” segment capturing cost-conscious consumers.
Threats
- Trade Policy: Sustained or increased tariffs on auto parts and metals impacting OEM production and pricing.
- Consumer Affordability: Prolonged high interest rates cooling demand for new vehicle financing.
- Inventory Imbalance: Rapid normalization of new vehicle supply leading to potential price wars among retailers.