Penske Automotive's Model Designed To Outperform Uncertain Economic Environment, Says Analyst

Benchmark analyst Michael P.Ward has reiterated a Buy rating on the share of Penske Automotive Group Inc PAG with a price target of $175.
The analyst believes PAG’s diversified model will outperform the auto sector in an uncertain economic environment.
About 70% of Penske’s Automotive Retail revenue comes from Premium Brands, the highest percentage of the Dealer Comp Group.
Historically, buyers of Premium Brand vehicles are less affected by economic cycles, which in the analyst’s view, will mitigate risk for PAG in an uncertain economy.
Replacement of the aging fleet along with increasing distribution needs has provided growth above the auto sector, and the analyst expects the trend to continue.
The analyst has cut 2023 and 2024 earnings assumptions largely to reflect ongoing used vehicle industry concerns and an increase in expected floorplan interest costs.
The analyst expects supply in the global new vehicle market to improve steadily in 2023 but believe the improvement will be slower than market expectations in the Premium/Luxury and volume import brands.
Penske’s track record with capital allocation over the years has been among the best in the auto sector. The analyst expects the dividend and repurchase authorization to be increased in 2023.
Price Action: PAG shares are trading higher by 4.14% at $142.35 on the last check Tuesday.

Analyst Calendar