Penske Earnings: Strong Quarter to End 2024, and 2025 Looks Solid Except for Tariff Risk

Penske Automotive Group finished 2024 with a strong fourth quarter and diluted EPS of $3.54 beating the $3.29 LSEG consensus. We are increasing our fair value estimate to $157 per share from $150 on the time value of money and a slightly lower weighted average cost of capital to factor in a modest amount of incremental debt in the capital structure over time. We may make further valuation changes when we roll the model forward for the 10-K. We think the company’s prospects for 2025 and beyond remain very bright as growth runways for consolidation in both retail automotive and heavy-truck dealerships remain long and organic growth should continue, with the firm one of the largest auto dealers in the US and UK. We expect buybacks and acquisitions in 2025 across retail automotive and Class 8 trucks. The capital-allocation decision is a strategic one based on whether the better value, based on multiples, is to do a deal or repurchase stock. The company also increased its quarterly dividend for the 17th straight quarter, to $1.22 per share, a 2.5% rise, and we expect multiple increases in 2025. Year-end remaining buyback authorization was $156.8 million.