Car Dealer Penske Automotive Accelerates Buybacks as Profits Soar

Penske Automotive

Group Inc. is accelerating share buybacks just after the car-dealership chain documented steeply better gains as the industrywide car or truck lack continues to bolster charges.

Bloomfield Hills, Mich.-dependent Penske has repurchased 1.9 million shares this year through April 26, 1.2 million of them in the initial quarter. That amount was up from 800,000 shares bought in the fourth quarter. Previous yr, the enterprise bought 3.3 million shares whole.

Entirely, the company invested $294 million on buybacks in 2021, adopted by $184 million so much this yr by means of April 26. Penske’s share rate on Friday closed at $104.82, about flat from the beginning of the year.

Shelley Hulgrave, main fiscal officer of Penske Automotive Team



Image:

Jill Scapelliti

The corporation expects to continue on making use of buybacks to allocate money, assuming industry conditions keep constant and it receives approval from the board, reported

Shelley Hulgrave,

Penske’s main financial officer. U.S. auto dealership acquisitions—one of the company’s chosen approaches to set cash to work—have grow to be a lot more pricey over the previous 12 months as their earnings have climbed, Ms. Hulgrave stated.

“We believe it is a good use of cash in comparison to the higher valuations of acquisition opportunities,” she mentioned, referring to share repurchases.

Previous week, Penske said it had $46.3 million still left to devote less than its existing buyback authorization. The company’s board has been supportive of buybacks, Ms. Hulgrave mentioned.

Providers have been unveiling ideas to invest in back again shares at a history speed this year, having advantage of modern market volatility next Russia’s invasion of Ukraine and uncertainty on desire-price hikes from the Federal Reserve.

Organizations on the S&P 500 have poured a lot more than $5.3 trillion into repurchasing their personal shares considering the fact that 2010. WSJ explains how stock buybacks do the job, and why there is discussion in excess of no matter whether or not they are great for the economy.

Revenue at Penske more than doubled throughout the initial quarter from a yr previously, to $367.9 million. Profits jumped 21%, to about $7 billion. Money and equivalents on the balance sheet elevated to $170.3 million, up from $100.7 million at the conclude of 2021.

The organization, as properly as other dealership chains, are benefiting from a mixture of elements, including a shortage of vehicles due to chip-source issues, steady customer demand and higher sticker charges. Other car suppliers, together with

Lithia Motors Inc.,

AutoNation Inc.,

and

Asbury Automotive Group Inc.,

also noted more robust to start with-quarter earnings.

“It’s just a wonderful time to be an vehicle dealer,” mentioned

Ali Faghri,

an analyst with investment organization Guggenheim Securities. Other dealership chains are also working with their added hard cash for buybacks and acquisitions, he included.

At Penske, gross profit for each motor vehicle for new vehicles amplified 68% from a 12 months earlier, to $6,840, whilst the exact metric for utilised automobiles rose 26%, to $2,284.

In addition to retail motor vehicle income, Penske also sells industrial vehicles and operates a motor vehicle distribution enterprise. As of March 31, the company’s retail automobile enterprise, which includes services and areas, accounted for 84% of revenue, while its truck dealership division accounted for 12%, according to Ms. Hulgrave. Its distribution business made up the rest, she mentioned. The company’s dealerships are situated in the U.S., U.K., Canada, Germany, Italy and Japan.

Though the business is even now interested in acquisitions, it is remaining extra selective than it has been in the previous presented the high valuations across the sector, Ms. Hulgrave said.

In April, Penske obtained 3 BMW Mini dealerships and a assistance middle in the U.K., as nicely as a BMW Mini dealership and support center based in Escondido, Calif. In February, it bought Workforce Truck Centres, a Canadian professional truck enterprise.

Penske did not disclose a purchase cost for any of the acquisitions. The discounts were being funded with funds circulation from functions, Ms. Hulgrave stated.

Publish to Kristin Broughton at [email protected]

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Katherine T. Burrows

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