Used Car Blues Hit Bottom Line, But Penske Speeds Ahead with Sales Growth

Penske Automotive Group Inc PAG reported fourth-quarter FY23 sales growth of 4% Y/Y to $7.27 billion, beating the analyst consensus of $7.21 billion. 

The results benefited from continued strong performance in retail automotive and retail commercial truck operations, with an increase of 8% in retail automotive new units delivered and a 7% increase in same-store service and parts gross profit.

Total retail automotive same-store revenue increased 4%, including a 7% rise in service & parts revenue.

The company’s gross profit increased 0.4% Y/Y to $1.19 billion, and the gross margin contracted to 16.3% from 16.9% a year ago.

The operating margin was 3.7%, down from 4.8% a year ago, and operating income for the quarter fell 20.8% Y/Y to $265.7 million.

EBITDA for the quarter fell to $316.5 million, down from $446.0 million a year ago. Adjusted EPS of $3.45 missed the analyst consensus of $3.69.

The company recorded a non-cash goodwill impairment charge of $0.61 per share for the quarter, related to the lower supply of quality and low mileage used vehicles for its customers.

The company held $96.4 million in cash and cash equivalents as of December 31, 2023.

The company recently approved a 10% increase in the quarterly dividend per share to $0.87, payable on March 1, 2024, to shareholders of record as of February 15, 2024. 

In 2023, Penske repurchased 2.6 million shares of common stock for about $358.7 million and had $215.5 million remaining under the existing repurchase authority as of December 31, 2023.

Chair and CEO Roger Penske said, “Demand for new vehicles remains strong while used vehicle supply and affordability remains challenging….I was particularly pleased with the sequential performance of retail automotive new and used vehicle gross profit per unit retailed which only declined marginally from the third to fourth quarter of 2023.”

Also Read: Penske Automotive’s UK Expansion: Adds $1B Revenue Stream With Rybrook Dealerships

Price Action: PAG shares are down 1.28% at $147.82 on the last check Wednesday.