Car Dealer Penske Automotive Accelerates Buybacks as Profits Soar

Penske Automotive

Group Inc. is accelerating share buybacks immediately after the auto-dealership chain noted steeply increased revenue as the industrywide vehicle shortage carries on to bolster price ranges.

Bloomfield Hills, Mich.-based Penske has repurchased 1.9 million shares this year by way of April 26, 1.2 million of them in the very first quarter. That amount of money was up from 800,000 shares acquired in the fourth quarter. Final yr, the enterprise purchased 3.3 million shares overall.

Completely, the business invested $294 million on buybacks in 2021, adopted by $184 million so much this yr via April 26. Penske’s share value on Friday shut at $104.82, about flat from the commencing of the 12 months.

Shelley Hulgrave, main financial officer of Penske Automotive Group



Photo:

Jill Scapelliti

The business expects to continue on using buybacks to allocate funds, assuming market place conditions keep regular and it gets approval from the board, claimed

Shelley Hulgrave,

Penske’s main economical officer. U.S. car or truck dealership acquisitions—one of the company’s most well-liked means to place capital to work—have come to be more high-priced over the previous year as their revenue have climbed, Ms. Hulgrave mentioned.

“We imagine it is a fantastic use of hard cash when compared to the superior valuations of acquisition opportunities,” she stated, referring to share repurchases.

Past week, Penske stated it experienced $46.3 million remaining to expend underneath its existing buyback authorization. The company’s board has been supportive of buybacks, Ms. Hulgrave mentioned.

Firms have been unveiling strategies to acquire back again shares at a document speed this yr, getting advantage of current market place volatility pursuing Russia’s invasion of Ukraine and uncertainty on fascination-price hikes from the Federal Reserve.

Firms on the S&P 500 have poured additional than $5.3 trillion into repurchasing their individual shares given that 2010. WSJ clarifies how inventory buybacks function, and why there is debate in excess of irrespective of whether or not they are very good for the economy.

Financial gain at Penske extra than doubled throughout the initially quarter from a calendar year earlier, to $367.9 million. Profits jumped 21%, to about $7 billion. Dollars and equivalents on the balance sheet improved to $170.3 million, up from $100.7 million at the end of 2021.

The business, as well as other dealership chains, are benefiting from a blend of factors, which include a scarcity of vehicles owing to chip-source complications, steady purchaser demand from customers and higher sticker charges. Other motor vehicle stores, together with

Lithia Motors Inc.,

AutoNation Inc.,

and

Asbury Automotive Team Inc.,

also noted more powerful initial-quarter earnings.

“It’s just a excellent time to be an vehicle seller,” explained

Ali Faghri,

an analyst with financial investment business Guggenheim Securities. Other dealership chains are also employing their extra dollars for buybacks and acquisitions, he included.

At Penske, gross profit for each vehicle for new cars greater 68% from a year previously, to $6,840, although the very same metric for used autos rose 26%, to $2,284.

In addition to retail motor vehicle profits, Penske also sells business trucks and operates a automobile distribution company. As of March 31, the company’s retail automobile enterprise, which involves expert services and areas, accounted for 84% of profits, whilst its truck dealership division accounted for 12%, according to Ms. Hulgrave. Its distribution small business created up the rest, she claimed. The company’s dealerships are located in the U.S., U.K., Canada, Germany, Italy and Japan.

Though the organization is continue to fascinated in acquisitions, it is remaining much more selective than it has been in the earlier offered the significant valuations across the market, Ms. Hulgrave claimed.

In April, Penske obtained a few BMW Mini dealerships and a service middle in the U.K., as perfectly as a BMW Mini dealership and support heart primarily based in Escondido, Calif. In February, it bought Workforce Truck Centres, a Canadian business truck enterprise.

Penske didn’t disclose a invest in price for any of the acquisitions. The discounts were funded with dollars move from operations, Ms. Hulgrave reported.

Write to Kristin Broughton at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8