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Penske Automotive Group Inc PAG

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Penske Continues the Streak of Dealers Having Record Second-Quarter Results

Analyst Note

| David Whiston, CFA, CPA, CFE |

Penske Automotive Group reported all-time record quarterly results with second-quarter adjusted diluted EPS from continuing operations of $4.47 beating the Refinitiv consensus of $2.91. As explained in our July 15 note, the company announced preliminary results of EPS of over $4 and pretax income exceeding $450 million, both of which held true. We said on July 15 that we expected to make a modest fair value increase, but with 2021 full-year results looking to be better than we thought on July 15, we are raising our fair value estimate to $83 from $70. The change is from time value of money, more equity income, an increase in revenue through 2025, a lower cost of debt, and better overhead cost leveraging than previously modeled in light of how 2021 is progressing. We model total revenue across 2021-25 of $146 billion, 5.1% higher than in our previous model. This change reflects higher growth in all areas of the company and a slight increase in our forecast U.S. industry new light vehicle sales for each of 2021-24. We now expect 2021 sales about in the mid-16 million range compared with low-16 million previously. We are assuming the semiconductor shortage starts to improve in the third quarter, but we don’t see it ending this year.

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Company Profile

Business Description

Penske Automotive Group operates in 22 U.S. states and overseas. It has 143 U.S. light-vehicle franchises including in Puerto Rico as well as 161 franchises overseas, primarily in the United Kingdom. The company is the second- largest U.S.-based dealership in terms of light-vehicle revenue and sells more than 35 brands, with 93% of retail automotive revenue coming from luxury and import names. Other services, in addition to new and used vehicles, are parts and repair and finance and insurance. The firm's Premier Truck Group owns 35 truck dealerships selling mostly Freightliner and Western Star brands, and Penske owns 19 CarShop used-vehicle stores in the U.S. and U.K. The company is based in Michigan and was called United Auto Group before changing its name in 2007.

2555 Telegraph Road
Bloomfield Hills, MI, 48302-0954
T +1 248 648-2500
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2019
Stock Type Cyclical
Employees 23,000


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