Penske Automotive Earnings: Service Growth and Good Used Vehicle Performance Are Key Highlights

We are not changing our Penske Automotive Group fair value estimate after the company reported a solid first quarter 2024. Diluted earnings per share declined 25.5% to $3.21, missing the $3.35 LSEG consensus. Revenue rose year over year by 1.5% while same-store retail automotive revenue fell 0.7% as good service growth of 4.9% could not offset low-single-digit declines in finance, new, and used vehicles. The 43-store truck segment saw revenue fall by 11.6% and 15.2% on a same-store basis due to poor new truck sales caused by supply chain problems hitting the industry, such as a supplier fire. Retail automotive saw a 13.2% fall in new vehicle gross profit as new vehicle gross profit per unit fell by 17.2% to $5,229, excluding Mercedes agency business in the United Kingdom, which has been a commission business since first quarter 2023. These large new vehicle declines are everywhere in the dealer space now due to profits coming down from large artificial highs induced by the chip shortage, so we are not concerned with their magnitude.