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Penske Automotive Group Inc PAG

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Morningstar’s Analysis

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Penske's Third Quarter Is an All-Time Company Record

Analyst Note

| David Whiston, CFA, CPA, CFE |

Penske’s third-quarter results were its best ever earnings with diluted EPS from continuing operations of $4.46 beating the Refinitiv consensus of $3.54 and rising 45.3% year over year. Foreign exchange helped EPS by $0.06. We are raising our fair value estimate to $91 from $83 from the time value of money, a higher long-term return on new invested capital assumption, and mostly due to modeling a 30.6% increase in equity income in light of how 2021 is tracking. The firm’s 28.9% stake in Penske Transportation Solutions has grown equity income by 154.2% in the first nine months of 2021 through cost controls and exceptional demand for truck leasing as fleets cannot buy all the new trucks they want at this time due to supply chain shortages. This shortage showed in same-store truck dealership unit sales down 3% but same store truck gross profit rose 35.9%, with all segments posting healthy growth as Penske’s 35 truck stores enjoy pricing power from low inventory as the light vehicle (retail automotive) stores also continue to do.

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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 22 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 Sep 30, 2021
Fiscal Year End Dec 31, 2019
Stock Type Cyclical
Employees 24,000