Car Dealer Penske Automotive Accelerates Buybacks as Profits Soar

Melissa M. Taylor

Penske Automotive

Group Inc. is accelerating share buybacks following the motor vehicle-dealership chain described steeply increased profits as the industrywide car or truck lack proceeds to bolster rates.

Bloomfield Hills, Mich.-dependent Penske has repurchased 1.9 million shares this year via April 26, 1.2 million of them in the initially quarter. That sum was up from 800,000 shares purchased in the fourth quarter. Last 12 months, the business obtained 3.3 million shares total.

Completely, the corporation expended $294 million on buybacks in 2021, adopted by $184 million so significantly this yr through April 26. Penske’s share price on Friday shut at $104.82, about flat from the beginning of the yr.

Shelley Hulgrave, main money officer of Penske Automotive Group



Photograph:

Jill Scapelliti

The enterprise expects to continue employing buybacks to allocate cash, assuming marketplace circumstances hold constant and it receives acceptance from the board, reported

Shelley Hulgrave,

Penske’s main financial officer. U.S. motor vehicle dealership acquisitions—one of the company’s most popular approaches to put cash to work—have develop into additional highly-priced above the past yr as their earnings have climbed, Ms. Hulgrave explained.

“We consider it is a fantastic use of income in comparison to the significant valuations of acquisition alternatives,” she mentioned, referring to share repurchases.

Past 7 days, Penske mentioned it had $46.3 million remaining to devote less than its present buyback authorization. The company’s board has been supportive of buybacks, Ms. Hulgrave claimed.

Businesses have been unveiling designs to obtain back again shares at a history rate this 12 months, getting advantage of current industry volatility next Russia’s invasion of Ukraine and uncertainty on desire-level hikes from the Federal Reserve.

Organizations on the S&P 500 have poured additional than $5.3 trillion into repurchasing their own shares due to the fact 2010. WSJ clarifies how stock buybacks operate, and why there is certainly discussion in excess of whether or not they are fantastic for the economy.

Earnings at Penske a lot more than doubled through the to start with quarter from a 12 months previously, to $367.9 million. Profits jumped 21%, to about $7 billion. Cash and equivalents on the balance sheet amplified to $170.3 million, up from $100.7 million at the conclude of 2021.

The organization, as nicely as other dealership chains, are benefiting from a mixture of factors, which include a scarcity of autos because of to chip-supply issues, regular consumer demand and high sticker selling prices. Other car or truck vendors, which includes

Lithia Motors Inc.,

AutoNation Inc.,

and

Asbury Automotive Team Inc.,

also claimed stronger very first-quarter earnings.

“It’s just a excellent time to be an vehicle supplier,” mentioned

Ali Faghri,

an analyst with investment business Guggenheim Securities. Other dealership chains are also using their more money for buybacks and acquisitions, he added.

At Penske, gross earnings for every motor vehicle for new cars and trucks improved 68% from a year earlier, to $6,840, even though the identical metric for utilised cars and trucks rose 26%, to $2,284.

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

Though the corporation is even now fascinated in acquisitions, it is remaining more selective than it has been in the previous offered the substantial valuations throughout the business, Ms. Hulgrave claimed.

In April, Penske obtained three BMW Mini dealerships and a company center in the U.K., as well as a BMW Mini dealership and service center centered in Escondido, Calif. In February, it acquired Group Truck Centres, a Canadian professional truck firm.

Penske did not disclose a purchase rate for any of the acquisitions. The discounts have been funded with hard cash circulation from functions, Ms. Hulgrave stated.

Create to Kristin Broughton at [email protected]

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