Company Reports

Penske Automotive's stock closed at $223.44 on July 29, up 1.6%, after the firm reported second-quarter adjusted diluted EPS of $3.62 that beat the $3.42 LSEG consensus. Same-store retail automotive revenue increased 5.7% with all major segments growing.

On July 22, Penske Corporation and Mitsui, a large Japanese company, submitted an offer to take Penske Automotive Group private for $210 per share in cash. Penske Corp. and Mitsui already own a combined 72.2% of PAG's stock as of April 16. The price is a 7.6% premium to PAG's July 21 close.

Penske Automotive Group receives over 90% of its light-vehicle dealer revenue from import and luxury brands, led by BMW, Lexus, and Toyota. This percentage is significantly higher than many dealers and helps mitigate the cyclical nature of auto sales as these more-affluent customers won't limit their discretionary spending. Despite this wealthy customer, the firm's operating margin tends to be on the lower end of the publicly traded dealers. Penske gets less of its gross profit from higher-margin finance and insurance commissions than its peers, and selling, general, and administrative expenses as a percentage of gross profit can at times run higher than the other public dealers. Penske cannot get as much finance business—a 100% gross margin business—as its peers because more of its customers lease vehicles or pay cash. The firm leases nearly all its real estate, so when excluding rent, Penske's SG&A ratio is competitive.

Penske Automotive Group's stock surged to close up 6.3% on April 29 after reporting first-quarter adjusted diluted earnings per share of $3.05 that, although down 15% year over year, beat the $2.92 LSEG consensus.

Penske Automotive Group receives over 90% of its light-vehicle dealer revenue from import and luxury brands, led by BMW, Lexus, and Toyota. This percentage is significantly higher than many dealers and helps mitigate the cyclical nature of auto sales as these more-affluent customers won't limit their discretionary spending. Despite this wealthy customer, the firm's operating margin tends to be on the lower end of the publicly traded dealers. Penske gets less of its gross profit from higher-margin finance and insurance commissions than its peers, and selling, general, and administrative expenses as a percentage of gross profit can at times run higher than the other public dealers. Penske cannot get as much finance business—a 100% gross margin business—as its peers because more of its customers lease vehicles or pay cash. The firm leases nearly all its real estate, so when excluding rent, Penske's SG&A ratio is competitive.

Penske Automotive Group receives over 90% of its light-vehicle dealer revenue from import and luxury brands. This percentage is significantly higher than many dealers and helps mitigate the cyclical nature of auto sales; these brands have more-affluent customers who will not limit their discretionary spending during a downturn. Despite this wealthy customer, the firm's operating margin tends to be on the lower end of the publicly traded dealers. Penske gets less of its gross profit from higher-margin finance and insurance commissions than its peers, and selling, general, and administrative expenses as a percentage of gross profit can at times run higher than the other public dealers. Penske cannot get as much finance business—a 100% gross margin business—as its peers because more of its customers lease vehicles or pay cash. The firm leases nearly all its real estate, so when excluding rent, Penske's SG&A ratio is competitive.

Penske's fourth quarter saw lower overhead cost scaling and same-store revenue declines of 3.6% in retail automotive and 6.2% in truck stores. The company maintained its emphasis on dividends, with its 21st consecutive quarterly increase, this time by 1.4% to $1.40 per share.

Penske Automotive Group's third-quarter diluted EPS fell 5% to $3.23. The company reported an approximate $23 million pretax headwind from items such as the UK cyberattack on Jaguar Land Rover stores, poor truck demand, and higher UK insurance costs.

Penske Automotive Group receives over 90% of its light-vehicle dealer revenue from import and luxury brands. This percentage is significantly higher than many dealers and helps mitigate the cyclical nature of auto sales; these brands have more-affluent customers who will not limit their discretionary spending during a downturn. Despite this wealthy customer, the firm's operating margin tends to be on the lower end of the publicly traded dealers. Penske gets less of its gross profit from higher-margin finance and insurance commissions than its peers, and selling, general, and administrative expenses as a percentage of gross profit are higher than the other public dealers. Penske cannot get as much finance business—a 100% gross margin business—as its peers because more of its customers lease vehicles or pay cash. The firm leases nearly all its real estate, so when excluding rent, Penske's SG&A ratio is competitive.

Penske Automotive's second-quarter diluted EPS of $3.78 beat the $3.56 LSEG consensus and increased 4.7% year over year. Same-store retail automotive revenue fell 1.3% but some of that weakness stemmed from the used vehicle move to Sytner Select, which aided profits despite lower volume.

Penske Automotive Group reported first-quarter adjusted diluted EPS of $3.39, which beat the $3.27 LSEG consensus and was up 5.6% year over year. Total gross profit rose 1.9% and same store retail automotive revenue grew 2.1%, led by 7.2% growth in new vehicles and 4.2% service growth.

Penske Automotive Group receives over 90% of its light-vehicle dealer revenue from import and luxury brands. This percentage is significantly higher than many dealers and helps mitigate the cyclical nature of auto sales; these brands have more-affluent customers who will not limit their discretionary spending during a downturn. Despite this wealthy customer, the firm's operating margin tends to be on the lower end of the publicly traded dealers. Penske gets less of its gross profit from higher-margin finance and insurance commissions than its peers, and selling, general, and administrative expenses as a percentage of gross profit are higher than the other public dealers. Penske cannot get as much finance business—a 100% gross margin business—as its peers because more of its customers lease vehicles or pay cash. The firm leases nearly all its real estate, so when excluding rent, Penske's SG&A ratio is competitive.

The White House on March 5 said that the 25% tariffs on vehicles imported into the US from Canada and Mexico that began a day earlier will be delayed for one month, provided those vehicles comply with the United States-Mexico-Canada Agreement. The change came after President Donald Trump spoke with the leaders of the Detroit Three, who argued that the tariffs hurt firms such as theirs but not those that export vehicles into the US from nations such as Japan, Germany, and South Korea. White House comments to the media on March 5 indicate that tariffs on all vehicle imports regardless of the country of origin will still commence on April 2, so we think 25% or reciprocal tariffs will start at that time.

The 25% tariffs on all US imports from Canada and Mexico began March 4. These tariffs are punishment for what President Donald Trump feels are inadequate measures by these two nations and China for fentanyl and illegal immigration into the US. Lately, White House rhetoric seems more focused on fentanyl than immigration. We consider these tariffs very bad news for our US autos coverage, but for now, we're leaving our fair value estimates in place.

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.

Penske Automotive Group receives over 90% of its light-vehicle dealer revenue from import and luxury brands. This percentage is significantly higher than many dealers and helps mitigate the cyclical nature of auto sales; these brands have more-affluent customers who will not limit their discretionary spending during a downturn. Despite this wealthy customer, the firm's operating margin tends to be on the lower end of the publicly traded dealers. Penske gets less of its gross profit from higher-margin finance and insurance commissions than its peers, and selling, general, and administrative expenses as a percentage of gross profit are higher than the other public dealers. Penske cannot get as much finance business—a 100% gross margin business—as its peers because more of its customers lease vehicles or pay cash. The firm leases nearly all its real estate, so when excluding rent, Penske's SG&A ratio is competitive.

We expect trade policy and electric vehicle tax credits to be the US auto industry focus of a second US presidential term for Donald Trump. Emission regulations will also likely come into play, as we don't expect the Trump administration to grant California a waiver to set its own rules under the Clean Air Act of 1970. We also expect Environmental Protection Agency rules for 2027-32 model years issued in March, which, relative to the 2026 rule, call for a nearly 50% reduction in average light vehicle fleet carbon dioxide emissions for 2032 down to 85 grams (73 for cars and 90 for trucks) of C02 per mile, to be reduced or eliminated.

Penske Automotive’s third-quarter results were solid thanks to management’s good handling of many new vehicle stop-sale orders imposed by manufacturers such as BMW, Lexus, Toyota, and Porsche. The BMW and Mini brands are 26% of retail automotive revenue for the company while Toyota and Lexus are 14% and Porsche 9%. These stop-sale orders only impacted certain vehicles within brands, and the company was able to procure other BMW vehicles not under stop-sale to prevent the quarter from being far worse. Diluted EPS of $3.39 was $0.02 short of the LSEG consensus and the metric received a $0.03 boost from foreign currency, but we’ve seen more severe impact this earnings season from these stop-sales at other public auto dealers we cover. We are raising our fair value estimate to $150 per share from $148 on slightly higher equity method income based on how 2024 is trending.

Penske Automotive Group receives over 90% of its light-vehicle dealer revenue from import and luxury brands. This percentage is significantly higher than many dealers and helps mitigate the cyclical nature of auto sales; these brands have more-affluent customers who will not limit their discretionary spending during a downturn. Despite this wealthy customer, the firm's operating margin tends to be on the lower end of the publicly traded dealers. Penske gets less of its gross profit from higher-margin finance and insurance commissions than its peers, and selling, general, and administrative expenses as a percentage of gross profit are higher than the other public dealers. Penske cannot get as much finance business—a 100% gross margin business—as its peers because more of its customers lease vehicles or pay cash. The firm leases nearly all its real estate, so when excluding rent, Penske's SG&A ratio is competitive.

Penske Automotive Group had a good second quarter with diluted earnings per share of $3.61 (beating the LSEG consensus of $3.39) and revenue up 3.1% year over year to a quarterly record $7.7 billion. We are raising our fair value estimate to $148 from $142 on the time value of money and a slightly less long-term investment rate. Management has terminated the CarShop stand-alone used vehicle brand in the United Kingdom (but not in the United States) and rebranded the UK stores as Sytner Select, which may mean less capital investment over time. Sytner is a leading UK dealer group that Penske acquired in 2002. The cyberattack on dealer management system vendor CDK that started June 19 was an immaterial headwind for Penske because it only uses CDK in the truck dealer segment.