Lithia Motors Inc

Equity Research 29 July 2026 | 8:11AM EDT

Lithia Motors Inc. (LAD): First Take: 2Q26 EPS beat driven by better-than-expected SG&A and finops; Used retail GPU +20%

Lithia Motors reported 2Q26 adj. EPS of $10.03, above the GS/consensus (FactSet) Mark Jordan, CFA | estimates of $8.80/$8.73, with the beat driven by (1) better-than-expected SG&A Goldman Sachs & Co. LLC and (2) a larger gain than expected from financing operations, which we note was Kate McShane, CFA largely driven by a much lower provision expenses on both a y/y and q/q basis. Total | revenue increased 2.2% y/y to $9.791bn (vs. GS/consensus of $9.956bn/$9.639bn) Goldman Sachs & Co. LLC

and same-store sales declined 1.6%, with new vehicles -1.5%, used vehicles -2.2% Emily Ghosh | (retail and wholesale), F&I -5.2%, and aftersales +1.0%. Gross margin decreased 20 Goldman Sachs & Co. LLC bps y/y to 15.3% (vs. GS/consensus of 15.0%/15.5%), and we note same-store total vehicle gross profit per unit decreased 2.4% y/y to $4,119 but increased from 1Q26’s Nishi Agarwal | $3,928. Lithia’s adjusted SG&A-to-gross ratio increased 92 bps y/y to 68.6%, below Goldman Sachs India SPL the GS estimate of 70.0% and consensus of 69.8%. Grace Chee | Bottom line: LAD’s 2Q beat was primarily driven by better-than-expected SG&A and Goldman Sachs & Co. LLC

a larger gain than expected from financing operations, which we note reflects a Samantha Chiang | much lower provision expense on both a y/y and q/q basis. The company’s Goldman Sachs & Co. LLC SG&A-to-gross profit ratio increased, but to a much lesser extent than expected due to the aforementioned SG&A beat, while gross profit was relatively in line with expectations, but we note a significant sequential improvement in new retail GPU likely reflecting LAD’s focus on segment profitability. We expect a positive reaction to the print, particularly given the strong SG&A result, and expect questions to focus on the company’s ability to maintain profit momentum going forward.

Key Highlights n Lithia reported a gain from financing operations of $36.5mn, well above the GS estimate of $23.7mn, and is responsible for an estimated $0.82 of the $1.23 beat vs. our EPS estimate. Managed receivables increased 23% y/y (+5% sequentially), though was relatively in line with the GS estimate. The larger-than-expected gain was largely driven by a significantly lower provision expense ($15.8mn vs. $26.4mn/$21.2mn in the prior quarter/year, and the GS estimate of $26.5mn), which we note decreased to 1.2% of managed receivables, well below the trailing four-quarter average of 2.1%. n Same-store total vehicle GPU increased 4.9% sequentially driven by a ~20% sequential increase in used retail GPU which came in much better-than-expected ($2,019 vs. GS estimate of $1,700 and prior quarter of $1,680), and as new retail and F&I GPU were essentially flat q/q. In our view, the

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

Goldman Sachs Lithia Motors Inc. (LAD)

stronger used retail profitability highlights the company’s focus on improving segment profitability, as the same-store mix (core/CPO/value) was consistent q/q. n Aftersales same-store sales growth came in below our estimate (1.0% v.s GS estimate of 3.0%), yet gross margin increased 120 bps y/y (above the GS estimate of +100 bps y/y) as segment profitability continues to improve, likely reflecting LAD’s focus on improving labor productivity.

Segment Results n New vehicle - New vehicle same-store sales decreased 1.5% y/y (vs. the GS estimate of -0.5%) driven by a 2.2% decrease in units (vs. the GS estimate of -3.0%), partially offset by a 0.1% increase in the average selling price (vs. the GS estimate of +0.5%). Same-store new vehicle…