: Lithia Motors stock set to fall after earnings miss, as gross margin and profit per vehicle drop

Shares of Lithia Motors Inc. LAD were indicated down about 4% in premarket trading Wednesday, after the automotive retailer reported fourth-quarter profit and revenue that missed expectations, as gross margin contracted and vehicle profit per unit fell sharply. Net income declined to $247.7 million, or $9.00 a share, from $291.0 million, or $9.57 a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share of $9.05 was well below the FactSet consensus of $10.10. Revenue grew 10.8% to $6.99 billion, to miss the FactSet consensus of $7.07 billion. Cost of sales rose more than revenue, up 14.1% to $5.78 billion, as gross margin fell to 17.3% from 19.7%. Average gross profit per unit fell 17.3% to $5,691, with new vehicle retail down 13.1% to $5.344 and used vehicle retail down 33.7% to $2,137. The stock has rallied 17.0% over the past three months through Tuesday, while the S&P 500 SPX has gained 3.6%.

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