Car Dealer Penske Automotive Accelerates Buybacks as Profits Soar


Penske Automotive

Group Inc. is accelerating share buybacks after the car-dealership chain reported steeply bigger gains as the industrywide auto shortage proceeds to bolster price ranges.

Bloomfield Hills, Mich.-centered Penske has repurchased 1.9 million shares this yr via April 26, 1.2 million of them in the very first quarter. That total was up from 800,000 shares bought in the fourth quarter. Very last yr, the firm bought 3.3 million shares full.

Completely, the corporation spent $294 million on buybacks in 2021, adopted by $184 million so considerably this year by means of April 26. Penske’s share value on Friday shut at $104.82, about flat from the commencing of the yr.

Shelley Hulgrave, main financial officer of Penske Automotive Team


Jill Scapelliti

The firm expects to keep on working with buybacks to allocate income, assuming sector circumstances hold continuous and it receives approval from the board, mentioned

Shelley Hulgrave,

Penske’s main monetary officer. U.S. motor vehicle dealership acquisitions—one of the company’s preferred strategies to put funds to work—have develop into far more costly above the past year as their earnings have climbed, Ms. Hulgrave reported.

“We feel it is a fantastic use of hard cash in comparison to the superior valuations of acquisition alternatives,” she said, referring to share repurchases.

Last 7 days, Penske mentioned it had $46.3 million still left to expend less than its existing buyback authorization. The company’s board has been supportive of buybacks, Ms. Hulgrave reported.

Corporations have been unveiling ideas to invest in again shares at a report tempo this calendar year, taking benefit of the latest sector volatility next Russia’s invasion of Ukraine and uncertainty on desire-rate hikes from the Federal Reserve.

Providers on the S&P 500 have poured extra than $5.3 trillion into repurchasing their individual shares since 2010. WSJ points out how inventory buybacks do the job, and why there is discussion around irrespective of whether or not they are good for the economy.

Profit at Penske additional than doubled during the very first quarter from a year earlier, to $367.9 million. Revenue jumped 21%, to about $7 billion. Income and equivalents on the harmony sheet enhanced to $170.3 million, up from $100.7 million at the end of 2021.

The organization, as well as other dealership chains, are benefiting from a combination of aspects, together with a lack of motor vehicles due to chip-supply difficulties, constant consumer need and high sticker price ranges. Other car or truck merchants, like

Lithia Motors Inc.,

AutoNation Inc.,


Asbury Automotive Group Inc.,

also noted much better first-quarter earnings.

“It’s just a good time to be an vehicle supplier,” explained

Ali Faghri,

an analyst with financial commitment company Guggenheim Securities. Other dealership chains are also making use of their added funds for buybacks and acquisitions, he added.

At Penske, gross earnings for every car or truck for new vehicles amplified 68% from a yr before, to $6,840, whilst the exact same metric for utilized vehicles rose 26%, to $2,284.

In addition to retail vehicle gross sales, Penske also sells industrial trucks and operates a motor vehicle distribution business enterprise. As of March 31, the company’s retail auto business, which includes services and areas, accounted for 84% of income, when its truck dealership division accounted for 12%, in accordance to Ms. Hulgrave. Its distribution business manufactured up the relaxation, she mentioned. The company’s dealerships are situated in the U.S., U.K., Canada, Germany, Italy and Japan.

When the enterprise is nonetheless fascinated in acquisitions, it is being additional selective than it has been in the previous provided the superior valuations throughout the sector, Ms. Hulgrave said.

In April, Penske acquired 3 BMW Mini dealerships and a service heart in the U.K., as effectively as a BMW Mini dealership and support heart based mostly in Escondido, Calif. In February, it acquired Team Truck Centres, a Canadian business truck business.

Penske didn’t disclose a buy price tag for any of the acquisitions. The promotions have been funded with funds move from operations, Ms. Hulgrave claimed.

Generate to Kristin Broughton at [email protected]

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