DETROIT- Auto dealership operator Group 1 Automotive Inc on Thursday reported a fourth-quarter profit but fell short of profit margin expectations.

Shares of the Houston-based company, which have gained 34 percent since since the start of the fourth quarter, slipped 4 percent in early trading, reported Reuters.

"GPI continued to demonstrate solid cost traction in the quarter and top line was strong though gross margins in all segments looked soft versus our expectations," Morgan Stanley analyst Ravi Shanker said in a research note.

Net income in the fourth quarter jumped to $10.6 million, or 46 cents a share, compared with a net loss in the year-earlier quarter of $1.95 million, or 8 cents a share.

Excluding one-time items, earnings were 64 cents a share, two cents better than analysts polled by Thomson Reuters I/B/E/S had expected.

Revenue rose 25 percent to $1.44 billion, above the $1.33 billion analysts had forecast. The growth was driven by a 24.2 percent jump in retail unit sales.

Shanker, who has an "underweight" rating on the stock, said new vehicle revenue was weaker than he expected, but used vehicle revenue and parts and service were both stronger.

J.P. Morgan analyst Himanshu Patel said in a research note that the overall gross margin, at 15.1 percent, was below the 16.6 percent he expected.

The company, which operates 100 dealerships, draws about 60 percent of its sales from stores in Texas, California and Massachusetts. Its largest manufacturer by new car sales is Toyota Motor Corp at almost 37 percent of its sales.