Car Dealer Penske Automotive Accelerates Buybacks as Profits Soar

Penske Automotive

Group Inc. is accelerating share buybacks immediately after the vehicle-dealership chain claimed steeply greater earnings as the industrywide car scarcity proceeds to bolster costs.

Bloomfield Hills, Mich.-centered Penske has repurchased 1.9 million shares this 12 months by April 26, 1.2 million of them in the first quarter. That volume was up from 800,000 shares bought in the fourth quarter. Past calendar year, the business purchased 3.3 million shares complete.

Altogether, the enterprise put in $294 million on buybacks in 2021, adopted by $184 million so considerably this 12 months by way of April 26. Penske’s share value on Friday shut at $104.82, about flat from the beginning of the yr.

Shelley Hulgrave, main economical officer of Penske Automotive Group



Image:

Jill Scapelliti

The company expects to keep on using buybacks to allocate funds, assuming marketplace problems keep continual and it gets acceptance from the board, said

Shelley Hulgrave,

Penske’s main fiscal officer. U.S. auto dealership acquisitions—one of the company’s chosen ways to put funds to work—have grow to be much more high priced over the earlier yr as their gains have climbed, Ms. Hulgrave stated.

“We assume it is a wonderful use of dollars in contrast to the higher valuations of acquisition opportunities,” she mentioned, referring to share repurchases.

Previous week, Penske reported it had $46.3 million left to commit beneath its current buyback authorization. The company’s board has been supportive of buybacks, Ms. Hulgrave reported.

Providers have been unveiling plans to invest in back again shares at a history speed this calendar year, having advantage of modern marketplace volatility pursuing Russia’s invasion of Ukraine and uncertainty on curiosity-fee hikes from the Federal Reserve.

Companies on the S&P 500 have poured far more than $5.3 trillion into repurchasing their have shares since 2010. WSJ points out how inventory buybacks get the job done, and why there is certainly debate around regardless of whether or not they’re good for the financial system.

Financial gain at Penske far more than doubled in the course of the 1st quarter from a yr previously, to $367.9 million. Revenue jumped 21%, to about $7 billion. Funds and equivalents on the harmony sheet increased to $170.3 million, up from $100.7 million at the finish of 2021.

The company, as well as other dealership chains, are benefiting from a mix of aspects, including a scarcity of vehicles due to chip-supply issues, continuous purchaser demand from customers and superior sticker price ranges. Other auto vendors, which include

Lithia Motors Inc.,

AutoNation Inc.,

and

Asbury Automotive Group Inc.,

also described more robust first-quarter earnings.

“It’s just a great time to be an auto seller,” mentioned

Ali Faghri,

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

At Penske, gross gain for every car for new vehicles greater 68% from a yr earlier, to $6,840, although the identical metric for utilised vehicles rose 26%, to $2,284.

In addition to retail automobile profits, Penske also sells industrial vans and operates a auto distribution enterprise. As of March 31, the company’s retail car business, which involves solutions and parts, accounted for 84% of revenue, though its truck dealership division accounted for 12%, in accordance to Ms. Hulgrave. Its distribution business enterprise produced up the rest, she said. The company’s dealerships are situated in the U.S., U.K., Canada, Germany, Italy and Japan.

Whilst the enterprise is continue to intrigued in acquisitions, it is remaining more selective than it has been in the past offered the significant valuations across the business, Ms. Hulgrave said.

In April, Penske obtained a few BMW Mini dealerships and a provider heart in the U.K., as properly as a BMW Mini dealership and services heart based in Escondido, Calif. In February, it acquired Team Truck Centres, a Canadian professional truck enterprise.

Penske did not disclose a invest in price for any of the acquisitions. The discounts had been funded with cash circulation from operations, Ms. Hulgrave mentioned.

Generate to Kristin Broughton at [email protected]

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