Penske Automotive (PAG) Q3 Earnings call transcript Oct 29, 2024
2min read Penske Automotive Group (PAG) reported its third-quarter 2024 financial results, showcasing a strong performance despite facing challenges such as stop sales of certain vehicles and the impact of the CDK cybersecurity incident. The company generated $304 million in income before taxes, $226 million in net income, and earnings per share of $3.39.
Financial Highlights
PAG recorded a 2% increase in overall revenues to a third-quarter record of $7.6 billion, with a 14% increase in servicing parts to a record $778 million. The company's retail automotive brand mix, which comprises 72% of the revenue from premium brands, remained a key differentiator. Gross margin was consistent at 16.4%, and SG&A expenses as a percentage of gross profit were 71.2%, significantly lower than pre-pandemic levels.
Retail Automotive
The retail automotive sector saw mixed results, with new units increasing 5% but same-store new units declining 2%. The company has been transitioning U.K.-based car shop locations to Sytner Select, which has contributed to a 13% decline in used vehicle retail during the quarter. However, excluding these dealerships, used vehicles retail would have increased 1%.
Retail Commercial Truck Business
The retail commercial truck business performed well, with Premier Truck Group selling 6,331 new and used units in Q3, up 14% from the previous year. Despite challenges in the freight market, PAG continues to pursue acquisitions as part of its capital allocation strategy.
International Operations
In the U.K., PAG is integrating the 16 dealerships and $1 billion in estimated annual revenue it acquired earlier this year. The company is transitioning U.K. car shop locations to Sytner Select to align the used car operation with franchise dealerships. This change has led to a decline in used vehicle retail, but same-store revenue increased 8.5%.
Future Outlook
PAG remains optimistic about its future prospects, with plans to continue growing its service and parts business, which accounts for approximately half of its total gross profit. The company is investing in dynamometers and equipment to enhance customer satisfaction and drive margin in its shops. PAG also plans to expand its retail automotive operations in Australia, acquiring a third Porsche dealership and expecting to add $130 million in estimated annualized revenue.
Capital Allocation and Dividend
PAG's capital allocation strategy has been a key driver of its growth, with a focus on acquisitions and returning capital to shareholders through dividends and securities repurchases. The company has returned approximately $350 million to shareholders so far in 2024, including an 11% increase in the cash dividend to $1.19 per share.
Conclusion
Penske Automotive Group's third-quarter 2024 earnings report highlights the company's resilience and adaptability amid challenges, with strong financial performance and strategic investments in growth areas. The company's focus on diversification, disciplined capital allocation, and continued cost control bodes well for its future prospects. PAG's outlook remains positive, with a focus on expanding its retail automotive operations and increasing its presence in the commercial truck market.
